This past summer, the NASPP and Solium co-sponsored a quick survey on global stock plan administration. We asked companies about the technological challenges they experience when it comes to administering global stock plans, focusing on 12 primary challenges related to tax compliance, financial reporting, and other administrative matters. Close to 70% of respondents indicated that they struggle with four or more of the challenges identified and several noted that they struggle with nine or more of the challenges.
For today’s blog entry, I highlight five things I learned from the survey:
1. There are still a lot of manual processes out there.
Two-thirds of respondents say they spend too much time on manual processes. This is a high-risk proposition: it is difficult to implement adequate controls over processes and calculations performed in a spreadsheet. This seems especially concerning given that the SEC is in the process of adopting rules requiring recovery of compensation for all material misstatements, even if due to inadvertent error (see “SEC Proposes Clawback Rules,” July 7, 2015). One incorrect calculation discovered too late could result in recoupment of bonuses and other incentive compensation paid to executive officers.
2. Tax compliance is a top concern for companies.
This really isn’t a surprise—let’s face it, tax laws outside the United States are a hot mess. Every country does something different. Some countries change their laws every few years (I’m looking at you, Australia and France) and grandfather in old awards. Some countries have different rules for social insurance taxes vs. income taxes. Add in mobile employees and, well, you have a lot of work for tax lawyers.
3. Regulatory compliance is also a challenge.
56% of respondents cite keeping up with regulatory changes as a top challenge and 45% cite regulatory requirements in other countries. Regulatory compliance goes beyond tax laws to include things like securities laws, data privacy (a hot topic these days, see “Data Privacy Upheaval,” December 3, 2015), labor laws, currency restrictions and a host of other issues. It’s hard to stay on top of it all.
4. It’s the participants that suffer.
Ultimately, in the struggle to administer a global stock plan, something has to give and that something is usually the participant. Only 50% of respondents offer a qualified plan in countries where they could; the hurdle of regulatory compliance gets in the way. And 75% of respondents said that they would focus more on employee education if they could just spend less time on basic administration.
5. Expectations are low.
When we asked companies what is on their wish list for their administrative system, I was surprised at how low some items ranked (it was a “check all that apply” question, I thought everyone would want just about everything). For example, despite the fact that 71% of respondents reported tax-compliance for mobile employees as a top challenge, only 64% wanted a system that could calculate tax liabilities for mobile participants. It left us wondering if companies need to dream bigger for their administrative platforms.
Check out the White Paper and Survey
If you haven’t had a chance to read it yet, check out the white paper on the survey results and download the full results from the Solium website.
Buck Consultants’ 2013 Global Long-Term Incentives survey returned insight into some of the trends that capture the pulse of the global happenings in stock plans. In today’s blog, I’ll highlight some of the key observations.
It’s a Small World, After All
Oops, as soon as I wrote the above caption, the song from Disney’s “It’s a Small World” ride has been looping in my head. Sorry if it’s happening to you now, too (although misery does love company).
What I was reaching for is that some of the global trends point to a fairly consistent and uniform approach across the global board. Among them:
Full value awards (time and performance based) are squarely the dominant form of equity compensation, with RSUs presently delivering the most value, globally.
Stock options are out; their use globally continues to decline.
The use of broad based equity globally is on the decline, and usage rates are projected to stay fairly flat in 2014. Senior management levels and above are most targeted to receive grants from the equity plan.
There weren’t any big surprises there – these trends have existed in the U.S. for a while now, but it is nice to have some confirmation that this truly is a global trend.
I was reminded when reviewing the summary of the survey of the key factors that drive global equity plan decisions:
Overall objective: the company’s high level objectives filter down to many decisions, including how and when to use equity compensation.
Local talent market: Sometimes it’s easy to forget that there are many other job markets and economies outside of the U.S. The dynamics of the local market can be a huge factor in determining a compensation approach. The survey summary cited the examples of China, India and the Philippines – all of whom have hot labor markets right now.
Red tape: This has long been a consideration for U.S. parent companies looking to extend their compensation programs abroad. Just how many legal, securities, and employment considerations exist are largely specific to each country and therefore need to be considered in advance of adopting an equity approach in those regions.
Taxes: The tax implications of certain award types are a big driver in determining what will maximize the value to the participant. Employer taxes are also a consideration.
Administration: Last, but not least, the cost and burden to administer these programs abroad is considered. There are only so many resources available, and in some cases it may not make sense to issue equity once the administrative analysis comes into play.
One of my favorite NASPP resources is the bundle of Country Guides in our Global Stock Plans portal. The Guides provide a lay of the land on a myriad of considerations (including commentary from the practitioners who work on these guides) for 34 countries. If you are looking to expand into new regions, or offer additional equity types in existing countries, the Country Guides should be your first stop. There are a myriad of other resources available in the portal as well, all contributed by the folks and firms who specialize in global stock plans – a true gold mine of information.
“There’s an app for that…” has become such a mainstream phrase in our society, it’s hard to remember that it’s only been a handful of years since “app” emerged as a word. As technology and apps have sprouted at light speed, it’s nice to see the trend carry over into our world of equity compensation. The more tools, the better. In today’s blog, I’ll highlight the features of a cool new app that just launched – the Baker & McKenzie Global Equity Matrix app (kudos to anyone who can accurately count how many times I use the word “app” in this blog today.)
Get in the Know
I’m an iPhone user, so I downloaded the app as soon as it was available last week, excited to test drive global stock plan information with a screen touch. By my count, you can presently access select tax and legal information for equity types in 40 different countries. The app is very simple to use – just choose your country, and decide whether you want to see “all” information, or filter the information for stock options, restricted stock/units, or ESPP. Voila, information on things like taxation, subsidiary deductions, exchange controls, securities restrictions, withholding and reporting, plan entitlement and data privacy all appear. Pretty nifty. One thing I really liked was that you can filter by country, equity type, and topic. That means if you only want to see information on data privacy for RSUs in Colombia, you can narrow the field of information and don’t have to scroll through a myriad of other data.
Some key highlights of the app include:
Available for iPhone, iPad and Android. Just search for “Global Equity Matrix”.
It’s Free. It’s a FREE app, which makes it easily available to all of us.
It’s regularly updated. I’m guessing this is similar to the hard copy matrix that Baker & McKenzie publishes with country updates. They indicate that this app will be regularly updated as well, so that should help to keep up with new developments.
Get updates to important developments. As things happen, updates will be sent right to your device.
I can completely see the value of an app like this one. We all bring our smartphones to meetings anyhow – wouldn’t it be great to tap into the considerations for a jurisdiction right there in the meeting, via an app at your fingertips? Technology keeps evolving, and I love these tools that are emerging to empower us with knowledge and help us to be even more efficient in our work.
The Global Equity Matrix app is available via your smartphone. You can also find the link in our Global Stock Plans portal. I can’t wait to see what someone thinks of next.