Fidelity Investments and Rutgers University's School of Management and Labor Relations have partnered to sponsor a new research fellowship delving into the issue of stock option programs for employees – and why employees participate in the way they do.
The new research will uncover emerging trends and issues regarding stock options, employee stock purchase plans, performance shares and other forms of equity compensation used by corporations to share ownership and capital income with employees.
Ilona Babenko, an assistant professor of finance in the W.P. Carey School of Business at Arizona State University, has been selected as the first recipient of the Fidelity fellowship. Babenko, who will begin her one-year research project this month, will explore why some workers do not invest in employee stock purchase plans. Rutgers University will provide her a $25,000 stipend funded by Fidelity.
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"Employee participation in ESPPs historically has been a huge challenge for many employers," said Kevin Barry, executive vice president of Fidelity's Stock Plan Services business, in a release. "Yet, there has been little research on the driving factors behind it. Fidelity is delighted to be working with Rutgers University, which is one of the few institutions in the country dedicated to exploring employee stock ownership.
"Through this independent analysis of the market, we will get a fresh assessment of emerging trends and worker sentiment. Using this information, we can reinforce to our participants how their stock plan assets can contribute to their long-term financial success," said Barry.
The Fidelity Fellowship is one of 23 fellowships to be awarded by Rutgers this year as part of an equity compensation research program started in 2008 at the School of Management and Labor Relations.
Research fellowships are awarded to Ph.D. candidates and postdoctoral scholars who are studying employee ownership, profit sharing, stock options and related topics. They can reside at Rutgers or their home institution.
"There are more than 20 million working Americans who qualify for some form of equity compensation each year but there are very few academics who study it," said Professor Joseph Blasi who holds the J. Robert Beyster endowed Chair in employee ownership at Rutgers. He is a sociologist and corporate governance professor who directs the fellowship program. "We are thrilled to be working with Fidelity as we explore this important topic."
As part of her research, Babenko intends to survey groups of workers who don't participate in ESPPs to determine the contributing factors such as financial illiteracy, unfamiliarity with stocks or personal financial constraints. She will also analyze what motivates employees to hold the company stock long term versus selling soon after purchasing through the ESPP program.
Finally, she will study whether employees who receive company stock through compensation plans tend to have higher participation in the equity markets and tend to make better financial decisions.
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