The NASPP Blog

Companies, regulators, and even employees are changing the way they look at equity compensation. We’ve seen new equity vehicles, changes to taxation of equity compensation, a more global and more mobile participant population, and more rigid attention being paid to compliance when it comes to tax withholding and reporting. Companies are finding that they need to consider a broader scope of implications when granting and managing stock plans. In the spirit of casting a broader net on managing equity compensation, here are two ways to protect your company by building flexibility into your grant agreements.

Global Grant Agreement

At industry events over the past few years, I have heard more advisors and companies recommending the use of a global grant document. The way this works is to create a general grant document with appendices that cover the country-specific language. The most important reason to use a global grant document is that it helps cover the issue of mobile employees. If an employee is granted in one country and moves to another country with country-specific requirements, then you have the protection of having provided those limitations, definitions, or tax withholding requirements already laid out in the original grant agreement. This can afford the company some protection to maintain compliance and also give the employee the opportunity to better understand the impact the move will have on his or her grant. As an added bonus, having a global grant agreement can reduce the administrative burden of designating the appropriate grant package to participants. If you would like to see what this kind of grant document might look like, check out this example posted to our NASPP Document Library.

Exercise and/or Tax Payment Methods

Giving employees the ability to choose which exercise price and tax withholding method will be applied to their transactions isn’t as attractive as it may sound at first. This flexibility can be confusing to employees and may create a large administrative burden. However, your plan and grant agreements both include language that affords the company the flexibility to apply as many payment methods as possible. You can incorporate language that permits all available payment methods in the documents and use policy to clarify which will be actually be available to employees. This helps to permit the company to respond to new regulations, restrictions, or other unforeseen circumstances. Include the flexibility to withhold tax even for jurisdictions in which you do not currently need to withhold in case the company’s obligation to withhold taxes changes later.

Ask the Experts: Tax Reporting for Stock Compensation

Don’t miss our webcast today on tax reporting for stock compensation. Today’s session is one of our popular “Ask the Experts” series. Our panel of experts will cover everything you need to know to fulfill U. S. tax reporting requirements for all forms of stock compensation and address specific questions submitted by NASPP members. Don’t miss out! Join in at 4: 00 p.m. Eastern.

-Rachel