Most of us who work in and around stock compensation have figured out by now that it takes a village to pull this off. By “this”, I mean successful administration of an equity plan – including compliance with tax, securities and other regulatory reporting/disclosures/requirements, interacting with and educating participants, recordkeeping, policy adherence and at least a dozen other things that I didn’t list. While we may have figured out that we can’t shoulder the responsibility alone, there are varied amounts of leverage available to help get the job done. Add in a global element – meaning issuing equity to participants outside of the U.S., and the complexity magnifies. In today’s blog, I explore the village needed to really stay on top of your global stock plan.

Data Doesn’t Lie

In the 2012 Global Equity Incentives Survey, co-sponsored by the NASPP and PwC, 78% of survey participants said that compliance is the most challenging issue in administering a global equity plan.

In the NASPP’s 2014 Domestic Stock Plan Administration Survey, co-sponsored by Deloitte, 74% of participants have either zero (0) or one (1) full time person dedicated to administering the company’s stock plans. Also surveyed were the quantity of part time personnel who performed stock plan duties part time, with those numbers spread across the board. There did appear to be a correlation between number of personnel and the size of the participant population with outstanding equity awards. The more participants, the more in-house personnel. That makes sense.

71% of respondents working for a public issuer reported outsourcing all or part of their equity plan administration, with 40% reporting they outsource 75% or more of their plan duties.

While the staffing and outsourcing data doesn’t dissect global versus domestic participants (though the survey is titled “domestic”), it can be largely assumed that many companies have at least some global participants (not all, but many).

The Village

We’ve figured out by now that administering a global equity plan is not a one-person job. Even if one person is tasked primarily with responsibility for the plan’s administration (such as the stock plan administrator or stock plan manager), that person likely oversees a number of other in-house and external resources that touch the company’s stock plans.

Given that the biggest issue in administering a global stock plan is compliance (no surprise there), the question then turns to how to use the “village” to succeed in compliance. When I think of a global stock plan village, I think of the following key components:

• In house person overseeing equity programs
• In house interested parties (like finance, accounting, treasury, payroll, human resources)
• External legal and tax advisers who have specialized knowledge about tax, legal and securities regulations in places where the company has participants
• First line resources (not necessarily advisers, but sources of information about new or emerging issues in the jurisdictions where the company has stock plan participants). These include things like the NASPP’s Global Stock Plan Portal.
• Local contacts in foreign jurisdictions (e.g. local human resources personnel)
• Service providers who offer recordkeeping, mobility, education, plan design or other services
• Compensation consultants
• I am sure there are others that you will write me about if I’ve missed them; the point is that it takes a lot of moving parts

Even with the village in place, the person tasked with oversight of the equity plans needs a constant and fresh supply of information on global practices and changes relevant to them. This is not in lieu of the village, this is part of the village. Some companies rely solely on local jurisdictions to let them know about regulatory changes. While local contacts are a helpful resource, they should not be the only resource. It’s important that the person tasked with oversight of the equity plans maintains just that – oversight. And that includes proactive awareness of jurisdictional changes.

Expanding the Village

I want to highlight a few resources to add to your village that are already available to you as part of your NASPP membership. Again, these are no replacement for the necessary parties to your own global village. However, they are front line sources designed to help you achieve what the majority describes as the most challenging issue – compliance.

Before I list the resources, it’s quiz time! Pop Quiz: Which 3 countries have the MOST subscribers to NASPP Alerts (updates on country specific developments)?

A. United Kingdom, Canada, Germany

B. China, United Kingdom, France

C. China, France, Japan

D. United Kingdom, France, Bermuda

The answer is at the bottom.

I threw that question in to introduce the first resource: NASPP Alerts. If you’re missing out on NASPP Alerts, you’re – well, missing out. Did you know your NASPP membership includes the ability to select which countries you’d like to receive updates about? It’s a simple as a check box. When something new is posted for a country that you’ve subscribed to, you will get an email. Right now you can get alerts for up to 69 countries. I’ll make it even simpler – to set your alerts, go here.

The second resource is the NASPP’s Country Guides, also available in the Global Stock Plans portal. If you look on the left side of the page, there are country-specific guides for 34 different countries. These are authored by local practitioners (the Canada Guide is authored by a law firm in Canada, the Japan Guide was prepared by lawyers in Japan, and so on). Several of these guides have been updated within the last 12 months. The Guides are not designed to replace your advisers, but rather to complement that relationship. They are perfect for the moment when you are sitting in a meeting and someone says “we are acquiring stock plan participants in Argentina next week” and you suddenly need to know the stock plan lay of the land in Argentina before you can have a full discussion with your advisers. Each Guide covers the basic tax, regulatory and securities considerations in the jurisdiction.

Finally, if you have a global related question, post it to our Global Stock Plans Discussion Forum (different from the general Q&A forum). The questions in the Global forum are answered by our Global Task Force members, who specialize in various aspects of global equity plans.

Some of you are already plugged into these resources, but for the rest that may not have discovered them yet – take a moment to check them out. After all, adding more to your village may help ease the compliance challenges.

-Jenn

Answer to pop quix: A – United Kingdom, Canada, Germany (in that order)

If you’ve read any of my prior blogs, it’s no secret that I’m a fan of employee education. Good employee education. Comprehensive employee education. Normally I don’t rant in the forum of the NASPP Blog, and today I will do my very best to avoid doing so, but I’m on the verge of it so be warned.

It’s Section 6039 reporting time, W-2s are on their way, cost basis reporting is on the brain (are employees going to figure this all out?) So my mind has naturally been on – education. Educating never stops, but it’s definitely at a peak this time of the year. Which then brings me to the question – did we educate enough? Did we put enough good information in our employees’ hands to help them navigate their questions without giving them the dreaded “advice” or leaving them short on facts?

Advice Gone Bad

Picture this: I’m thinking through all the questions I just posed above, when someone suggests that I check out a recent episode of a national radio broadcast. The topic of the show is financial advice. People call in, they get financial advice. Over the radio. Okay, so I’m already thinking – well, if someone calls in over a radio show to get financial advice, they probably should know that it’s really hard to know all the factors in that format, so take whatever it is with with a grain of salt, right?  I listened to the show, and here’s that part that makes me want to vent. Someone calls in and asks a question about an Employee Stock Purchase Plan (ESPP). The caller wants to know if they should invest in their company’s ESPP plan. Oh yay, there’s a plug for ESPP! Except that the radio host got it all wrong. He asks if the discount is 15%, and then says something to the effect of “yeah, that’s the law – they’re all 15%.” Then he goes on to tell the person not to invest in it. He doesn’t ask about whether there is a look back, or if it’s a Section 423 plan or not, or how the company’s stock has performed. And, to those who know ESPPs, we know there is no “law” dictating a 15% discount. Then, the host went on to remind his audience about all the licenses he used to hold (I’m assuming investment licenses), which came across to this listener as an effort to boost his position on why ESPP was a no-no. I started frothing at the mouth.

I did some additional digging and found that this show has millions of listeners per week. Now, maybe not all are interested in investing in their ESPP, but I bet some have an ESPP. And then it hit me – how frustrating it would be if the caller (or listeners) were employees of my company, and my educational efforts were going up against a famous radio personality who has ESPP all wrong. And, this isn’t the first time the same show has put out incorrect information on ESPPs – I found another blog from 6 years ago highlighting the same issue from the same personality. It’s frustrating when someone in a position of influence and giving financial advice in the earshot of millions gets it wrong.

Own the Message

And then it hit me – although we can’t control what education (no matter how bad or inaccurate) comes from other sources, we can control our own messaging and we have to do a darn good job at it or someone else is going to do it for us. That’s the point of my blog today.

Let’s face it – there are great, good and bad advisers in every category. It’s safe to assume that many of our employees are going to turn outside the company (as we often encourage them to do) to seek advice. This definitely is not a knock against all the advisers out there that get it right. There are plenty of those inside this industry and outside – and they are a valuable resource to our participants. The hard part is when they get bad advice from advisers who don’t understand equity plans. My conclusion is this – we obviously can’t control if a radio host gives bad ESPP advice to millions of listeners. Or, which advisers our employees choose. What can control is what we put out there. We don’t want to leave our employees in the position of having to fill in the blanks. The advice line is a fine one, but I have to think there are ways to put out enough factual information that employees can take that and make sense (or not) of what they are being told from their advisers – even famous ones.

So where can employees go for good information? In addition to your own internal communication efforts, employees can also seek information from myStockOptions.com, your service provider web site (which may also offer them access to advisers who have equity compensation knowledge) and even sites like the IRS’s website. There are several consultants out there that would be happy to come in and educate your employees. And, don’t forget the NASPP also has an Employee Communications portal – we’re always looking for more sample communications that can be shared generically in the portal, so if you’ve got samples send them to me at jnamazi@naspp.com.

I’m hopeful that one communication effort at a time, we can equip our participants with the information needed to recognize inaccurate information and bad advice.

-Jennifer