The NASPP Blog

One thing I love about this job is that I get to use colorful words that are otherwise challenging to work into everyday conversation. Today’s word is “escheatment.” Such a cool word, yet I never manage to use it in conversations with friends and family. But for this week’s blog entry, I discuss what I suspect is a sleeper issue for many of you: how abandoned property laws can be a problem for your employees–giving me ample opportunity to use the word “escheat” and all its various derivatives (“derivatives” is another cool word).

Escheat, Escheatment, Escheatable, Escheated

Most states are operating with pretty tight budgets these days and are looking for additional sources of revenue. For many states, abandoned property has become one of these sources. For our purposes, the abandoned property we’re concerned with are the shares of stock employees have acquired through their participation in company stock plans. If those shares sit in employees’ account long enough without any action on the part of the employees, especially if employees move and don’t keep their addresses up to date (but sometimes, even when addresses are current), the state may deem the accounts to be lost or abandoned and require the stock to be turned over to the state. The state then sells the stock and pockets the proceeds.

The period of time that the accounts must be inactive and what constitutes an inactive account varies by state. But, in today’s tough economic conditions, many states are stretching these definitions.

How Does This Apply to You?

You don’t want employees to lose stock they’ve acquired through your company stock plans to abandoned property statutes. Your company implemented stock compensation programs to provide a benefit to employees, not to help out with state budget deficits. Allowing plan stock to be escheated to the state undermines this objective. Not to mention, employees are likely to be none too happy about losing their stock and my guess is that you’ll be top on their list of people to complain to.

Beyond that, in some cases the company may even have a fiduciary responsibility to try to prevent the shares from being escheated. When employees are subject to escheatment, they may try to sue the company for their loss. Even where the company ultimately isn’t deemed liable, these lawsuits can be very costly (time and money) to defend.

What Can You Do?

Here are a few things you can do to protect stock plan participants from escheatment:

• Have a conversation with your brokers and transfer agent regarding their escheatment process. Know how they identify inactive, dormant, and lost accounts and what notifications they provide to account holders in danger of escheatment.
• Ask your transfer agent and brokers to notify you of pre-escheat listings and review these listings for current and former officers, directors, employees, etc.
• Ask transfer agent and brokers to code officer, director, consultant, and employee accounts (and any accounts for other individuals affiliated with the company, such as spouses of officers and directors), to make it easier to identify these folks if their accounts end up in escheatment.

For more information on abandoned property laws, listen to the archive or read the transcript of the NASPP webcast “Current Developments Impacting Brokers & Transfer Agents (And What They Mean to You).”

A Personal Plea
This is the last week to participate in the 2010 Domestic Stock Plan Design Survey.  This survey is an important benefit for our members; I will be personally grateful to all of our issuer members that complete it. Plus, you’ll qualify for discounts on the NASPP Conference, membership, and a raffle for an Amazon.com gift certificate.

So here’s how the value of participating in the survey stacks up:  Amazon.com gift certificate–$50; 10% discount on NASPP Conference–$139; Barbara’s undying personal gratitude–priceless!

18th Annual NASPP Conference
You have just one week left–until April 15–to take advantage of the $300 early-bird discount on this year’s NASPP Conference.  The Conference will be held from September 20-23 in Chicago.  Last year’s Conference sold out and we expect even more attendees this year.  Don’t count on the early-bird deadline being extended!

NASPP “To Do” List
We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing “to do” list for you here in my blog. 

• Register for the 18th Annual NASPP Conference–don’t wait; the early-bird discount is only available until April 15.
• Complete the 2010 Domestic Stock Plan Design Survey–you must complete the survey by this Friday, April 9.
• Register for the NASPP’s online Stock Plan Fundamentals program–the first webcast is Tuesday, April 13.
• Complete the Compliance-O-Meter quiz on Professional Development.
• Renew your NASPP membership for 2010 (if you aren’t an NASPP member, join today).
• For our Ohio members, attend your local Ohio NASPP chapter meeting on April 13. The meeting features John Hammond of Computershare (and poet laureate of the NASPP blog) on getting in fiscal shape with your plan management habits. Maybe he’ll do the whole presentation in iambic pentameter.

– Barbara