The NASPP Blog

“Do you know the difference between education and experience? Education is when you read the fine print; experience is what you get when you don’t.” – Pete Seeger

It’s unlikely that if you polled 1,000 high school graduates on their intended career goals that you’d find one who piped up, “I want to be a stock plan manager!” The career paths of active stock plan management team members is quite diverse. Many individuals in stock plan services arrive at their position through a series of employment opportunities that propel them into the world of equity compensation rather than a set of strategic moves toward this field. This means that equity compensation professionals are often learning on the job; learning through experience. While real world experience is essential, there is the danger that individual experience is mistaken for industry knowledge.

These are a few of the top areas where the line between personal experience and actual regulations may blur:

Tax Withholding

It is difficult to maintain 100% compliance when it comes to tax withholding and reporting, particularly internationally. There may also be situations where your company has taken a particularly conservative or liberal interpretation on an issue. When it comes to share withholding for RSUs, for example, some auditing firms and companies are comfortable with rounding tax withholding up to avoid fractional share issues without applying liability accounting.

Insiders and Trading Policies

Section 16 is an area where significant portions of policy could be completely company specific. For example, certain Section 16 officers are identified by their policy-making authority (or lack thereof) rather than their specific title. Or your company may be comfortable permitting the sale of shares to cover taxes on restricted stock vests during a blackout because it is the required withholding method. Knowing the facts behind policy decisions can give you the ability to recognize when circumstances invalidate or change those assumptions.

Plan Parameters

Your company’s stock plan and associated policies include specific definitions that may not be shared by other companies. The definition of FMV or the length of time options are exercisable after termination are two perfect examples. While it is very important to have a clear understanding of your plan parameters, it’s another issue entirely to take for granted that the parameters are compliant or represent common or best practices.

Data Management

The way in which you enter data into your stock plan administration software can be very company specific, especially when it comes to anything that is a work-around. Even if you have inherited detailed procedures, it doesn’t mean that they are still valid in the current environment. When it comes to your software, there is also the risk is that your data entry process is a legacy from and old version of the database or an inadequately thought-out solution.

Change

Why is it important to know where that line is between company-specific experience and actual regulation or best practices? Change happens. Regulations change (e.g., ESPP and the definition of the $25k limit), facts and circumstances change (e.g., an existing position may be modified to include policy-making responsibilities), and your employment may change either through an M&A situation or because of new opportunities. Not only that, but the status quo isn’t infallible. There could be policies or practices in place that are in need of updating.

To help keep you grounded, educate yourself, challenge the status quo and talk to other equity professionals. When it comes to workshops, webinars, white papers and alerts, don’t shy away from topics you think you are completely familiar with. Even if you have been adhering to a particular policy for a long time, it’s never too late to ask questions about it. Don’t just reach out to your peers and colleagues when you have a specific issue, ping them about general practices when you aren’t under the gun. Peruse the NASPP Discussion Forum or your stock plan management software user group forum to see what issues other companies are facing before they become your issues–and always keep in mind that the answers you find may be based on someone else’s experience.

-Rachel