The NASPP Blog

Anecdotal evidence suggests that most stock plan administrators have been handed their international equity compensation programs and asked to find a way to administer them. However, the increasing complexity in the international regulatory environment and increased scrutiny over international stock plans is providing a platform for stock plan administrators to be active participants in the redesign of international programs, if not in their initial implementation. If you have not already, you should put a review of your international plans in as part of your year-end processes.

Here are the top five areas to review:

1. Scope      How broad-based were your international plans intended to be? Are you still focusing on the same audience, and does that still make sense for your employee population in that area? Take some time to review your grant processes for your international employees to confirm that the programs you are using still fit the current population.
2. Exchange Controls      Exchange controls are a government’s regulation on the flow of money and securities in and out of the country. You will want to confirm that your plans do (or still do) conform to the exchange controls of the countries in which you are offering equity compensation. One exchange control update that has been the source of attention, concerns, and updates is China’s SAFE requirements detailed in Circular 78.
3. Securities Laws      Securities laws are regulations pertaining to the public sale of securities. Offering shares of stock to employees through equity compensation programs may require filings with the country in which the programs are administered. The most common international filing exemption is for offerings involving a limited number of employees. If you were relying on this exemption, pay special attention to the scope of your plans to make sure that if you are aware of when you exceed the maximum number.
4. Labor Laws      Labor laws are established to protect employees; they may be federal or local. One of the most sensitive issues under labor laws is the idea of entitlement. In reviewing your current programs, you will want to confirm that your HR policies (as they relate to equity compensation) comply with each country’s labor laws (e.g.; change in employee status, annual grant practices, etc.). Also, you will want to confirm any risk for the company if you are considering a change in your equity programs.
5. Taxation      Employer and employee taxes may change each year. It’s important to note that not all countries follow a January – December tax year. You will want to do a year-end review of taxation for each country; adjusting the review period for the appropriate year-end timeframe for each country. Also, don’t forget about corporate taxes! You will want to review your corporate structure with regard to your local subsidiaries and confirm that your deductions and/or reimbursements are compliant.

In addition to regular alerts, articles, and quarterly updates available on the Global Stock Plans Portal, here are some important materials you may have missed:

1. Introductory Materials to the Country Guides: There are currently 27 individual Country Guides available (stay tuned for more in January 2009!). The Introductory Materials from Jones Day will help guide you on what issues to consider as well as show you how to take full advantage of the guides.
2. Global Employee Stock Plan Compliance Matrix: This matrix by Baker & McKenzie highlights selected international tax and legal consequences associated with stock plans in 36 countries including the top five issues above as well as data privacy.
3. Plan Design Issues by Country: This concise matrix by GlobalSharePlans provides alerts for plan design considerations in 37 countries including specials risks, unusual requirements, and translation considerations. Keep an eye out for a special interactive tool that GlobalSharePlans will be sharing with NASPP members in early 2009!
4. Global Desk Reference for Stock Options, Restricted Stock and RSUs, Stock Purchase Plans, and Data Privacy: DLA Piper provides this Global Desk Reference set. Each one offers a snapshot of top issues in up to 49 countries including my top five issues, data protection, and communications issues.
5. Countries at a Glance for Stock Options, Restricted Stock and RSUs, Stock Purchase Plans, and Data Privacy: These country overviews by White & Case detail the employment, regulatory, and tax issues for 43 countries.

If you aren’t already, don’t forget to subscribe to the country alerts so that you can receive any breaking news on the countries relevant to your company’s stock plans.

Also, if you want to see what international plan design looked like in 2006, you can review our 2006 International Stock Plan Design Survey. We have just launched our new International Design and Administration Survey, co-sponsored again by Deloitte. It is the most comprehensive survey on all aspects of stock plan administration in the industry. Don’t miss out on your chance to participate in the survey and keep an eye out for the results in 2009!