Speaking Proposals: NASPP Conference speaking proposals are due a week from Friday, by March 1. With the Conference in September, we are on a tight schedule this year and cannot make any exceptions to this deadline, no matter how dire the circumstances. If you feel the flu coming on, plan accordingly.
Early-Bird Registration: For those of you that are not hoping to speak at the Conference, the deadline for early-bird registration ends on Friday, March 8. This deadline also will not be extended. Don’t pay more than you have to for the Conference; register by March 8.
Quick Survey on Globally Mobile Employees Take our quick survey on globally mobile employees. With just eight questions, we’re serious about the “quick” part–you can complete the survey in less than five minutes!
We Have a Winner! Congratulations to Elizabeth Dodge of Stock & Option Solutions! Elizabeth won our raffle for the free registration to the CEP Symposium.
Here’s your NASPP “To Do List” for the week:
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 we keep an ongoing “to do” list for you here in our blog.
California is serious about privacy–so serious that it’s an “inalienable right” in the California constitution. This should give consumers–and employees–in California an extra bit of confidence that their own personal information won’t fall into the wrong hands. It does, however, create some rather frustrating experiences when a California resident actually wants his or her personal information to be transferred out of the state. For example, if you are a resident of California you may find yourself at an out-of-state bank branch talking to a perfectly nice teller who insists you don’t have an account until you admit you are from California at which point he will say, “Oh…California. Why didn’t you say so?” In this respect, California may have more in common with the EU or Japan than with the rest of the United States.
Aside from the quirky anecdotes that data privacy laws provide, there are serious considerations for companies with international (or California) subsidiaries. HR, payroll and equity compensation practices must ensure that the very essential, but also very private, employee data is transmitted without violating applicable laws. Payroll considerations can be accomplished with relative simplicity compared to equity compensation by virtue of local payroll processing. The distinct difference for HR and stock plan management is that most companies want to house relevant information in one central location or database.
Consent
Just like my fun bank experience, this is an instance when employees should want to have their information transmitted–after all, it’s going to create a tangible asset for them. But, operating on the idea that you have a right to access the necessary information to create and manage grants for your employees isn’t enough. In many locations, employees must actually consent to have their personal information sent to you and also sent on to the broker who will ultimately facilitate transactions for them.
Compliance
The burden for ensuring your company policies compliant with data protection laws hopefully falls on your legal team. However, ensuring that equity compensation practices adhere to the policies is an ongoing consideration for stock plan management teams. Here are three important areas to consider when it comes to data privacy:
Incoming data -exactly what information about employees you collect and house in your stock plan administration database and how you access that information
Outgoing data – each instance where individual private information must be transmitted out of the stock plan administration database
Communications practices – when and how you are sending personal information back to your employees
Once you have established that your current practices are compliant, keep data protection in mind any time you are going to engage in a one-off situation involving the transmission of personal information. If you are in a merger situation, have opened a new office, or are partnering with another department to perform a data audit, these are all examples of situations where taking a moment to confirm that you are maintaining compliance with data privacy laws is a good idea.
Resources
The NASPP’s Global Stock Plans portal has several matrices that include data privacy issues companies should consider internationally. They can be found along the left column of the portal. We also have an update from Latham & Watkins on data privacy and protection in Germany, the UK, and Spain prompted by the draft Federal Data Privacy Act being considered in Germany. The Act could place more tringent qualifications on obtaining employee consent to collect and distribute personal information.
When it comes to compliance on your globally mobile employees, one of the most challenging aspects of achieving or maintaining compliance on tax withholding and reporting for your globally mobile employees is keeping pace with changes to applicable legislation and standards. Today, I highlight the top three recent changes that might impact your global mobility compliance.
France
Effective April 1, 2011, withholding on nonresident income from French-qualified awards will be required by employers. Fortunately, this is only applicable to the French-sourced portion of the income, but it is a change from the current withholding requirements. Like other tax withholding issues in France, there is always the thread of jail time or individual financial penalties for failure to comply. You can find more information about this legislation in the Pricewaterhouse Coopers article, Recent Legislative Updates.
China
As noted in this Ernst & Young alert, China will begin requiring employers to make of social security insurance contributions for all employees, including foreigners working in the PRC in July of 2011. Associated with this requirement is a host of administration concerns including actually enrolling nonresident employees with the appropriate social insurance agency, completing monthly contribution reporting, and issuing applicable termination certificates. To put some teeth in the requirement, there will also be a greater liability for noncompliance including fines of up to 300% of the missed payments.
United Kingdom
Thankfully, there is some relatively good news from the United Kingdom. Included in the new budget is the potential for some relief for mobile employees. Although not in the form of a tax break or even easier withholding processes, the UK Treasury has finally determined that it is time for a statutory definition of residence. Currently, residency in the UK is particularly ambiguous and based mostly on interpretations of case law and HMRC practice because the essential concepts of residence, ordinarily residence, and domicile are not clearly defined in UK tax law. As Deloitte highlighted in this alert from March of last year, the landmark case of Robert Ganes-Cooper created confusion for individuals and companies after it was determined that Mr. Ganes-Cooper was a tax resident. (You can also check out both Mr. Ganes-Cooper’s version of the facts and the HMRC’s statement on the case.) Although Mr. Ganes-Cooper satisfied the requirements outlined in the IR20 (The IR20 was replaced by HMRC6 in 2009), he didn’t actually leave the UK for tax purposes, which means he is still a resident and that the IR20 is not applicable.
This isn’t the first time that there has been a call for a clear definition regarding residency. In fact, both the IR20 and subsequent HRMC6 were intended to provide a clear test. The Treasury is hoping to create a new residency test in 2011 and will begin a consultation process on the subject in June of 2011. I am curious to see what ambiguity can be cleared up by the new test once it is available.
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.
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.
We have a lot of great new content on our NASPP site! I want to take the opportunity this week to let you know about some of the new features.
First, we have a new Quick Survey out on Global Stock Plans. Don’t forget to take a moment and complete this survey! It’s your opportunity to find out how other companies are dealing with some of the more difficult issues with global stock plans.
New Portals:
The NASPP portals provide a way to find consolidated information on the issues that matter most in stock plan management. Today, we have 26 portals listed; expect to see more in the future! You can access the NASPP portals from the list on the lower left side of the homepage, or through the drop-down menu on the navigation bar at the top of the site. The newest additions to our list of portals are:
Incentive Stock Options: Need a quick reference on the grant requirements for ISOs? Want to find the latest on Section 6039 Information Statements? The Incentive Stock Options portal not only has the comprehensive NASPP article on ISOs, it has final ISO regulations, articles, surveys, and sample documents.
Say on Pay: The Treasury, Congress, and the SEC have all proposed some form of say on pay requirements for companies. Our new Say on Pay Portal contains the proposed regulations along with memos and analysis on each. You can also find sample proxy statements from companies that have already taken steps to add a shareholder vote on compensation practices.
Surveys & Studies: I’m sure you all know that the NASPP publishes all Quick Survey, Stock Plan Design and Administration Survey, and Salary Survey results in the Surveys section of the Member Area drop-down menu on the navigation bar. But, did you know that we also have available comprehensive surveys and studies conducted by some of the best names in the industry? We’ve put them all together for you in our new Surveys & Studies portal. We’ve arranged this portal in a three-tab format so that you can find the study or survey you’re looking for by topic, year produced, or by the company publishing the information.
Updated Portals:
In addition to adding new portals, we’ve also gone back and reorganized some of our existing ones so that new developments and content are easier to find. Check out the updated 409A/Deferred Compensation portals and Executive Compensation Disclosures portal!
New content:
Our latest alerts on stock plan management practices, legislative and regulatory development, and global stock plans are always available on the NASPP homepage as well the corresponding portal. These are a few of the most recent additions:
There have been a lot of changes in global stock plan management. Don’t get left behind; sign up to have the latest alerts from specific countries send directly to your e-mail. In the past month alone, we’ve posted multiple alerts on Australia, the European Union, Portugal, Ireland, India and China. Don’t forget that you can search our global stock plan alert archives by country.
We’re not done, yet! You won’t want to miss out on what we have in store for next year. Renew your NASPP membership for 2010. If you aren’t an NASPP member, take advantage of our special offer and join today!