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A company sent employees a letter offering to buy company shares. It is not clear if the amounts offered would allow voting rights with the company. I am not interested in buying shares from the financial point of view (with my level of competence and situation awareness I do not think I could make a successful monetary investment, there is a possibility the shares will lose value). It is a big company with long history, not a startup.

The only reason I could possibly buy shares is if this would help to make me career with the company. I could envision some reasons:

  • Maybe company would think I am going to stay for long, maybe that could expect me more caring about the overall success,
  • Maybe feel thankful I gave money to them to expand the business, believe in they success.

How much would these factors compare to the education, employment history, job performance and other factors that I would normally see as more important?

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  • I've a feeling a very similar question was asked a couple of weeks ago. Can anyone find it? – David Richerby Nov 1 '17 at 11:52
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    depends on level Board members are normally expected to maintain a decent holding – Neuromancer Nov 1 '17 at 12:12
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    If the company really cared about you owning shares they would give them to you or offer you options. – JimmyJames Nov 1 '17 at 13:46
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It seems unlikely that owning or not owning a few shares would make any difference in your career. I've been involved in preparing performance appraisals, and whether the employee owned shares in the company was never even mentioned.

If in the US, the company may offer an Employee Stock Purchase Plan. That can be a good deal, if there is a significant discount.

Even if buying at a discount, your employer's stock should be at most a small proportion of your savings and investments. There are single events that could cause both a reduction in your employer's stock price and your own unemployment. It does not have to be as dramatic as the whole company going out of business. A couple of bad quarters and a decision to reduce headcount is enough.

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  • note that in the UK the most common form of share options is share save which is almost 99.9% risk free as is effectively tax free – Neuromancer Nov 1 '17 at 12:11
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    @Neuromancer I've edited my answer to indicate that the ESPP scheme is specific to the US. The OP needs to check the rules for any plan they have access to. – Patricia Shanahan Nov 1 '17 at 12:28
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    Employees were pressured to buy stock at Enron. Along with fraud, that was one of their biggest problems. – user8365 Nov 1 '17 at 12:44
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    If I recall, JeffO the retirement fund was Enron stock which made it totally worthless when they went under. That whole tsubject is interesting as a case study in how not to do business. There is a great book on it, Conspiracy of Fools. Should be required reading. – HLGEM Nov 1 '17 at 14:32
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    @HLGEM same thing happened at Polaroid: all 401k was in Polaroid stock, and you couldn't sell or convert except by quitting --- except for top-level management, all of whom cashed out prior to the stock tanking. Everyone else was seriously screwed. – Carl Witthoft Nov 1 '17 at 15:18
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Usually, the employee share purchase programs are part of incentive. The incentive may be in form a small discount on the price, a certain amount of company contribution if you stay for longer duration, or just a offer by the company to invest in its growth to employees. Contributions are optional, i.e. you have to opt in to buy shares.

The company is offering this facility so that you can make money. It is not seen as a loyalty program by the company to see who buys the maximum shares. Though monetary benefits be designed such that long time investors benefit more, but most of the time, your manager would not be even aware of how much stock you have bought, just like your manager wont be aware how much of stock you are buying from the market.

It should not be seen as a career enhancement step. Evaluate the investment as you would do to any other investment and do not buy just to show your interest in the company or expect this to enhance your career progress in any way. Chances are high that the company will see this as doing a favor to you.

Being a established player, their market cap would be too big to be affected by individual investor.

And to answer your last question, if its not enforced, its totally legal :).

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    These schemes also avoid any possible issues with illegal insider trading. Some company employees may know confidential information which is not available to outside investors, but that is reduced in importance by a long term (i.e. several years) incentive or options scheme which is open to all employees on the same terms. – alephzero Nov 2 '17 at 8:07
  • @alephzero thanks!! yes, we used to have well defined windows when we could trade in company stock due to insider trading restrictions !! Particularly close to result announcements, there would be blackout on buying/ selling stock using this option. – Rishi Goel Nov 2 '17 at 9:49
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There may be indirect benefits

On one hand I would not expect those in charge of your promotion to look at the shares you have when deciding on a promotion.

On the other hand:

  • I personally do find myself more involved with the company success when I have shares, even to the point that my performance can increase, and with this my chances of promotion.
  • Also, if the shares are doing well you always have a pleasant common topic with the higher ups, which could help in networking.

Therefore (assuming the company is doing well) I would recommend buying an amount but not to the point that you are dependent on it.

Note that employee shares can typically be beneficial from a financial point of view, but that you are putting all eggs in 1 basket. So if the company goes down the drain and you lose your job, this is likely at a time when the share value is also not strong.

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    +1 - Thanks for allowing me to leave your answer out of my answer. Just consider this answer an addendum to mine as this is essentially what I was going to add to mine;) – Dunk Nov 1 '17 at 17:15
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You state this:

It is a big company with long history, not a startup.

Okay, that is your answer right there: If you are not at a startup or at some company that is in need of help and you provide that help in some way that would be rewarded with stocks, purchasing stocks are meaningless.

That said, one reason a company that is well established would offer stocks is easy: To engender a sense of transparency and connection with staff. It might not mean much for you, but for someone else it might be a point of prestige to state they own stocks in the company.

But if you think during yearly review time someone will look at that stocks you own and say, “Well, this person owns stocks, that means we should treat them differently.” Well, that won’t happen.

It’s a perk. Nothing more and nothing less.

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It's doubtful that enough shares will be available to any individual employee to take any kind of contributing influence above what you have in your day job. The larger the company, the more shares it will have, and the less control shareholders will have.

For many companies, especially larger ones, it's purely an investment opportunity.

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The company has the obligation to you as shareholder to maximize economic success.

So from a purely technical aspect choosing letting the employee with shares take a desired position over an employee with greater aptitude for that position would be a misconduct against the shareholders.

Of course, if you have enough shares to influence who will lead the company, you can try to get someone behind the steering wheel who favors you for a certain job. But that kind of power does not normally come with employee stock options.

The rational behind these stock options is, you will do better work (for all shareholders) if you participate in the company's success.

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  • I have had jobs with policies that specifically preclude owning a sizable enough position to have that level of influence. Of course, if I ever had enough shares to demand a seat on the board of a publicly traded company, I doubt I'd need my 9-to-5. – Wesley Long Nov 1 '17 at 14:36
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    Even those who support Dodge v. Ford don't all agree with the blanket statement in your first paragraph. – Carl Witthoft Nov 1 '17 at 15:20
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    @Carl Witthoft: I really don´t follow. What are you getting at? – Daniel Nov 1 '17 at 15:25
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If you buy shares in your employer, and something bad happens, you lose not only your job but also your investment. It's not a good idea unless you have some insight into the future financial performance of the company, or you can actually afford to lose the money. Nobody cares if you have shares or not, yours will probably be on the lowest rung of the shares ladder.

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  • On the other hand, if you buy shares, and the company does well, then not only are you an employee of a successful company, but you can make substantial amounts of money from the growth in the shares. – Simon B Nov 2 '17 at 23:15
  • @SimonB that's true if you buys shares in any company. – James Nov 3 '17 at 9:20
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Owning shares in your company has nothing to do with increasing your career possibilities unless you own enough shares where it matters from a company ownership perspective.

The main reason companies offer employee stock purchase plans is to protect both the company and the employees from being accused of insider trading and all the legal hassles and costs that will go along with that.

Suppose I'm just a lowly engineer at my company (too true) and I'm working on a product that 'if successful' is expected to triple the company's income. Since I'm working on the product and if I know the product is exceeding expectations during development and being the analytical person that I am; I would certainly realize that tripling a company's income is going to result in a huge boost in the company stock price. Thus, the smart move would be to start buying up my company's stock. Oops, there's a major problem. I know material information that the public doesn't know that will potentially affect the stock price. Thus, it would be illegal for me to trade in my company's stock as this is a clear case of insider trading.

Employee stock ownership plans are the compromise for this dilemma. These plans purchase the company stock at periodic intervals (usually each paycheck). Thus, the trades are not considered as being executed because of insider knowledge but simply part of an investment plan. Even if this is a one-shot and not periodic opportunity then there are still rules that must be followed by the plan to ensure "insiders" don't get an unfair advantage. Plans like these are what allows employees who believe the company is going to be successful in the future to buy ownership into that success without fear of insider trading issues.

To directly respond to the post, assuming this is something new, the main reason your company sent a letter to everyone giving the opportunity to buy shares in the company is because there's probably several people who actually do want to buy shares in the company but are concerned about insider trading issues. It has nothing to do with seeing who is loyal to the company and who isn't.

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  • Of course, if you then want to sell your stocks, you have the insider trading problem again. – Paŭlo Ebermann Nov 1 '17 at 19:46
  • @PaŭloEbermann-There's rules that the plan has to follow which supposedly minimizes the insider knowledge effects of employees buying and selling their company's stock. Although, I'd agree the rules to minimize insider trading effects are not adequate. One such totally inadequate rule is that the higher ups at companies have to put in buy/sell orders 3 months in advance of their execution. If someone is running a company and doesn't have a darned good idea of whether their stock is going to be up/down in 3 months then they are totally incompetent.... – Dunk Nov 2 '17 at 19:23
  • ...I think the rule should be 5 years. Can you imagine how differently companies would be run if long term success was the goal instead of the current short-term emphasis? – Dunk Nov 2 '17 at 19:23

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