This past week I got a great question from a friend on Twitter:
@TMFJMo @MarketFoolery Legal jargon in the company handbook is killing me... pic.twitter.com/bHkWuvmhVc
— Zak Konarska (@zkonarska) October 26, 2015
First of all Zak, thanks for taking the time to ask the question, particularly in the awesome Twitter video form! I think this is something that a lot of folks out there probably have some level of experience with so I'm hopeful that this can prompt some additional perspective. But here goes...
I’ve worked for a couple of publicly traded companies myself (Bank of America and Travelers Insurance...and I did work for a ClubCorp country club though that was pre-IPO) and what I can tell you in my experience from an employee’s perspective is that generally speaking you don’t need to worry about much. Check to see if you are offered any restricted stock or options awards as an employee. Often you’ll get these if/when you reach certain thresholds of employment. This really all depends on your level of employment within the company though, so as a young graduate you may not have something like this (yet).
Often times big publicly traded companies will offer employees ways to invest in the company via their company-affiliated retirement plan and in some cases you may even get the stock at a discount depending on the plan or company. This can be worth taking advantage of if you believe in the company, believe you want to be an owner of shares for a long time to come, etc. and it would be an automatic deduction that would just come out of your paycheck. If for any reason you subsequently leave that company you’d still own those shares; they’re yours.
Typically you shouldn’t have many restrictions on buying shares of your company on the open market but I’d highly recommend checking with legal and/or human resources at your company as there may be guidelines that advise otherwise. I know the legal jargon sucks, but sometimes that’s where the answers are and if it’s still unclear you should be able to send an email request to your legal or human resources department to get clarification. And just ask them simply: “Are there any restrictions on employees buying shares of our company on the open market?”
As far as material information goes, I’m assuming that given your time with the company and age that you probably aren’t privy to a lot of material information (stuff that maybe the public’s not aware of yet that could have an effect on the business or its stock). Nevertheless, if you are at all even hesitant then make sure you check with legal before buying or selling shares. Erring on the side of caution is always the right course as it ultimately will keep you out of trouble.
Probably what you want to keep most in mind is your actual allocations. That is, how much money is tied to the particular company for which you work? It’s not just in shares that you may own. Remember this is the company that is signing your paycheck every couple of weeks too and you want to make sure to account for that. If you have a lot of your retirement funds tied up in said company along with your paycheck and then a worst-case scenario happens you could find yourself in a bind. So don’t over-expose yourself; there’s no reason to even at your young age. In the ideal scenario you could have a small portion of your 401(k) (or other company-related retirement plan) directed to company stock and then the rest allocated to fund-style vehicles that help keep you diversified. How diversified is ultimately up to the individual and their stage of life, but the bottom line is you want to be able to sleep at night.
I hope this helps Zak. And if it brings up some additional questions (or if I didn't address questions you had) please don't hesitate to let me know; you know where to find me.
Best,
JMo
I’ve worked for a couple of publicly traded companies myself (Bank of America and Travelers Insurance...and I did work for a ClubCorp country club though that was pre-IPO) and what I can tell you in my experience from an employee’s perspective is that generally speaking you don’t need to worry about much. Check to see if you are offered any restricted stock or options awards as an employee. Often you’ll get these if/when you reach certain thresholds of employment. This really all depends on your level of employment within the company though, so as a young graduate you may not have something like this (yet).
Often times big publicly traded companies will offer employees ways to invest in the company via their company-affiliated retirement plan and in some cases you may even get the stock at a discount depending on the plan or company. This can be worth taking advantage of if you believe in the company, believe you want to be an owner of shares for a long time to come, etc. and it would be an automatic deduction that would just come out of your paycheck. If for any reason you subsequently leave that company you’d still own those shares; they’re yours.
Typically you shouldn’t have many restrictions on buying shares of your company on the open market but I’d highly recommend checking with legal and/or human resources at your company as there may be guidelines that advise otherwise. I know the legal jargon sucks, but sometimes that’s where the answers are and if it’s still unclear you should be able to send an email request to your legal or human resources department to get clarification. And just ask them simply: “Are there any restrictions on employees buying shares of our company on the open market?”
As far as material information goes, I’m assuming that given your time with the company and age that you probably aren’t privy to a lot of material information (stuff that maybe the public’s not aware of yet that could have an effect on the business or its stock). Nevertheless, if you are at all even hesitant then make sure you check with legal before buying or selling shares. Erring on the side of caution is always the right course as it ultimately will keep you out of trouble.
Probably what you want to keep most in mind is your actual allocations. That is, how much money is tied to the particular company for which you work? It’s not just in shares that you may own. Remember this is the company that is signing your paycheck every couple of weeks too and you want to make sure to account for that. If you have a lot of your retirement funds tied up in said company along with your paycheck and then a worst-case scenario happens you could find yourself in a bind. So don’t over-expose yourself; there’s no reason to even at your young age. In the ideal scenario you could have a small portion of your 401(k) (or other company-related retirement plan) directed to company stock and then the rest allocated to fund-style vehicles that help keep you diversified. How diversified is ultimately up to the individual and their stage of life, but the bottom line is you want to be able to sleep at night.
I hope this helps Zak. And if it brings up some additional questions (or if I didn't address questions you had) please don't hesitate to let me know; you know where to find me.
Best,
JMo
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