Why More CFOs Are Turning To ESPPs |
Just when consumers thought everything was getting too expensive, prices are set to keep on going up. The war in Iran has spiked the price of diesel fuel, which powers many of the large trucks that move goods and parcels across the country, to more than $5 a gallon. This is an increase of $1.20 in the last two weeks, the steepest 14-day increase in diesel prices on record. In turn, that will quickly increase prices for groceries, household items and packages.
It’s not just land-based shipping that will suffer from the diesel price hike. Construction vehicles also use diesel fuel, so as the war in Iran continues, it may affect home building, renovations or infrastructure work across the nation.
As prices for everything go up, it’s a key time to reassess your business costs and determine how to find the money that now has to go toward energy, supply and transportation. Employee stock purchase plans are a benefit for publicly traded companies that have been getting more popular in recent years. They tend to have low upfront costs but can deliver positive long-term results. I spoke with Emily Cervino, head of industry relationships and thought leadership for Fidelity Investments, about why companies should take another look at this benefit. An excerpt from our conversation is later in this newsletter.
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As the Federal Reserve’s Open Market Committee begins its meeting this week, the overwhelming consensus among economists—more than 99% on CME FedWatch—is that baseline interest rates will stay the same. Economic data released over the last week supports that prediction. In January, annual inflation was 3.1%—an increase from December’s 3%, and above the 2.9% estimated by analysts, according to core consumption expenditures data from the Bureau of Economic Analysis. This indicator, well above the Fed’s 2% inflation target, isn’t the only bleak statistic from the federal government last week. The Department of Commerce revised its economic growth estimate for Q4 of 2025, cutting growth in half—down to 0.7% from 1.4%.
All of these statistics showing a slowing economy are from before the war with Iran began, so it’s likely that indicators will keep trending in the wrong direction. Oil prices keep climbing, as the global benchmark Brent Crude index hit $104 a barrel early Tuesday morning, and maintained a triple-digit price as the morning went on, as Iran continues to block the vital shipping lane through the Strait of Hormuz, and another oil tanker reported an attack as it passed through on Tuesday. Average gas prices in the U.S. neared $3.80 a gallon on Tuesday morning, and analysts say they are on track to hit $4 a gallon later this week—even though the U.S. is planning to tap the Strategic Petroleum Reserve. Analysts say gas prices will continue to climb, and likely won’t drop back to pre-war levels, even under the best circumstances, until late this year due to seasonal factors.
High gas prices impact the entire economy—from consumers who had already been feeling financially strained to businesses paying more for energy and imports, writes Forbes senior contributor Erik Sherman. Economists warned this week that the spiking gas prices, coupled with the declining job market, are ratcheting up the odds of a recession starting in the next 12 months.
That impact is already settling in. In March, consumer sentiment fell to 55.5 in the latest University of Michigan survey. While this is above the all-time low score of 51.0 last November, anything below 100 signifies economic pessimism. Survey Director Joanne Hsu said that consumer sentiment had been slowly building since November, but the Iran war—and most notably the dramatic, rapid rise in gas prices—“completely erased those initial gains.” And, Forbes senior contributor Pamela Danziger writes, consumers were already feeling strained from persistent inflation and tariffs—so they are now focusing only at price when shopping for anything.
As we enter the last month before the April 15 income tax deadline, it’s the busiest time of year for the IRS. But who’s running it? Forbes’ Kelly Phillips Erb points out the IRS has no commissioner right now, and hasn’t had one for more than six months. Former commissioner Billy Long—President Donald Trump’s pick to head the agency—was removed from the position on August 8, less than two months after being confirmed.
After Long’s departure, Treasury Secretary Scott Bessent was named acting commissioner of the agency, and a new position was created: IRS CEO. The tax agency’s CEO basically runs the day-to-day operations of the IRS—as the commissioner is supposed to—but unlike the IRS commissioner, this position doesn’t require Senate confirmation. Democrat senators have derided the IRS CEO as “a fake job that Congress has never authorized.” And, as with Bessent in the acting IRS commissioner position, the IRS CEO also has another important full-time government job. Social Security Commissioner Frank Bisignano is IRS CEO, essentially running two perpetually busy agencies at the same time.
This leadership structure at the very least gives the IRS short shrift, with no top leadership dedicated solely to operations at the government’s top revenue-collecting agency. It also may not comply with federal law, which limits acting officials to 210 days in jobs confirmed by the Senate. Last week, three top Democratic senators on the Finance Committee wrote a letter pointing out that Bessent’s tenure as acting IRS commissioner appeared to have expired. The Treasury Department agreed, and issued a statement Friday saying Bessent is no longer the acting commissioner, but Bisingano is “successfully leading day-to-day operations and reporting directly to the Secretary.” Nothing was mentioned about a permanent commissioner nominee.
This doesn’t change the question mark in leadership, and it doesn’t provide insight into how tax season is progressing at the agency. In January, the Treasury Inspector General for Tax Administration wrote in a memorandum that this year’s tax season may be challenging, especially given deep staffing cuts, a large backlog, and incomplete modernization efforts. Adding in several tax changes enacted by Congress last year, including Trump’s “no taxes on tips” proposal—guidance for which was updated earlier this month, in the midst of tax season—it wouldn’t be surprising if the agency had issues keeping up.
ARTIFICIAL INTELLIGENCE
Businesses all need trusted financial advisors, and Mastercard announced last week it’s rolling out an AI version of one. The fintech and credit giant is launching a Virtual C-Suite platform this year, using AI to bring executive-level insights to smaller businesses that may not have the resources to hire different key executives. Virtual CFO will be the first to launch, and Mastercard said it will be available through financial institutions, software providers and accounting platforms.
Technology has been used to provide CFO abilities to smaller companies, but Mastercard is the first large global fintech to announce AI-powered services this comprehensive. Nearly three-quarters of companies with annual revenue between $3 million and $15 million use fractional CFOs to help with their finances, according to provider Eagle Rock CFO. More are looking for these services: The market for fractional CFOs is growing at 12.4% annually.
How ESPPs Benefit Both Your Company And Employees
The employee stock purchase plan, or ESPP, is a benefit publicly traded companies can offer that helps build loyalty without incurring significant out-of-pocket costs. A study last year by Fidelity Investments and Equilar found that companies with the best ESPPs—a 15% discount on stock purchases with a lookback—outperform others. These companies on the S&P 500 had an average total shareholder return of 9% in the previous year—while companies with no ESPP had a 3% TSR. Over five years, companies with an ESPP had an 85% TSR, as opposed to 61% for no ESPP.
I talked to Fidelity Head of Industry Relationships and Thought Leadership Emily Cervino about reasons why more CFOs want to add ESPPs to their benefit packages. This conversation has been edited for length, clarity and continuity.
What are some of the reasons companies with ESPPs outperform their peers without them?
Cervino: ESPP drives retention. We know, based on work we’ve done at Fidelity, that tenure for employees in an ESPP is 12% longer than employees who are not in an ESPP.
We know that the cost of turnover is very high for companies. So not only does that have a quantifiable financial impact on employers, it also means that those employees are more invested in delivering more value. It’s not just the cost of turnover, but it’s the investment employees have in their company and their drive to deliver more value to the company as employee-owners.
Another thing is that ESPPs are really efficient ways to deliver value to the employees without using cash compensation. For companies that have a lot of margin pressure, ESPP can be a strategic tool because that gives them the ability to deliver meaningful employee value without a drain on their cashflow.
If we were talking a year from now, what would be the state of ESPPs?
We’ve definitely seen an uptick in interest over the last five or six years. About 52% of the S&P 500 is in an ESPP. That’s up from about 48% in 2020. Based on what we see and hear in our client base, it’s not slowing down.
Companies are continuing to explore their ability to offer an ESPP, but because it does have a long tail on it, requiring shareholder approval, sometimes it takes companies a while. The company I talked to earlier this morning, they’re probably not going to be offering an ESPP a year from now, but they’re going to be in the process of getting ready to launch it in conjunction with their open enrollment in the fall.
What advice would you have about ESPPs for a CFO looking at ways to improve employee benefits in a precarious economy?
ESPP squarely fits into that hole for them because this is a program that can deliver value to employees without any cash requirements from the company—the value is delivered through shares.
It creates positive cash flow for the company because employees make contributions into this plan, which is essentially a diversion of cash that would normally flow out through payroll. Instead, the company retains that cash. It’s accounted for as additional paid-in capital.
Beyond that, there’s tax deductions—that will make CFOs very happy—that they’re eligible for through these plans. And I suspect that almost every CFO would be happy if every employee in the company had a reason to think about the stock price every day.
Specialty minerals firm ICL appointed Asaf Alperovitz as its new chief financial officer, effective June 15. Alperovitz joins the firm from SolarEdge Technologies, where he worked as chief financial officer, and he will succeed Aviram Lahav, who is retiring.
Spirits and wine company Brown-Forman selected Jim Peters as its new executive vice president and chief financial officer, effective March 31. Peters most recently worked as executive vice president at Whirlpool Corporation, and he will succeed Leanne Cunningham, who is retiring.
Employee benefits provider Trustmark tapped Erik Braun to be its new chief financial officer and treasurer. Braun joins the company from Kuvare Holdings, where he served as chief financial officer, and he succeeds Phil Goss, who is retiring.
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