The NASPP Blog

Fireworks, watermelon, and a mild case of sunburn–yes, the Independence Day celebrations are behind me for another year. Of course, I can’t think about the Declaration of Independence without thinking about John Hancock’s bold, stylish signature and all that it symbolizes.

A signature represents the authenticity of an agreement or statement. The idea is to find something unique to a particular individual that proves his or her identity. In the world of equity compensation, we use signatures to authenticate that our participants have agreed to terms and conditions associated with our equity compensation programs.

Electronic Signature

As online grant acceptance becomes more common, companies should be addressing the issue of electronic signature. Online grant acceptance certainly has the potential to be more time-efficient, trackable, and cost-effective than distributing paper grant agreements and collecting and archiving the original signature records. However, the governing principles for the use of electronic or digital signatures are not universal.

Understanding Jurisdiction

Many countries, including the U.S., have regulations that recognize the legitimacy of the use of an electronic signature in executing official agreements. The requirements for authenticating an electronic signature may differ between countries, states, provinces, and cantons even if there is some form of applicable federal legislation. In the U.S., all 50 states have some form of electronic signature regulations; 47 have adopted the Uniform Electronic Transactions Act (EUTA). For information on electronic signature outside the U.S., refer to the Country Guides or regulatory guide matrices available on our Global Stock Plans portal.

The Technology Battle

There aren’t many areas in equity compensation where technology availability is readily given the ability to influence policy, but electronic grant acceptance could be one. A quick internet search today yielded all sorts of results for companies that authenticate a digital signature with technological breakthroughs like special pens, unique algorithms, or thumbprint/iris/DNA scans. While you won’t necessarily need to fully understand all the technical jargon behind the technology that supports your company’s electronic grant acceptance (or be requiring a blood sample from employees any time soon), it is important to know the general process steps that are available to you.

For example, can you prove that a participant has received a statement, opened a document, or accessed his or her account? Can you require that each document posted to an electronic agreement has been opened before the entire agreement may be accepted? What about requiring the participant to scroll through the documents? Is the same process available for all forms of equity compensation (including ESPP enrollment)?

Practical Application

Once you know exactly what control you have over the electronic grant acceptance process, you can identify the jurisdictions where the technology can support the authentication requirements. You may have some countries where the requirements are more rigorous than others. Your company will need to decide if the overall company policy for grant acceptance will require all participants to accept based on the same requirements or if you will customize the process for different jurisdictions. For locations where your legal advisors have advised against the use of online grant acceptance, you may still be able to use online document delivery where participants sign and return just the grant notice. To see how other companies are addressing this issue, check out our 2008 International Stock Plan Design and Administration Survey, cosponsored by Deloitte.

18th Annual NASPP Conference

For all the most effective and ways you can be communicating electronically, don’t miss the session, “Effective Electronic Education and Communication” at our Conference in Chicago this year!

-Rachel