It’s not often that the job of stock plan administrator shows up in a list of top jobs; this is no reflection of the quality of the job but more because few people outside of the stock plan community know this job exists. I have commiserated with many stock plan administrators about the difficulties of trying to communicate what they do to the uninitiated. It is not dissimilar to trying to explain my own job (sometimes it feels like no one has ever heard of the concept of a membership association).
So imagine my surprise when Andrew Schwartz of Computershare forwarded me an article from ThinkAdvisor that ranks stock plan administrator as #6 on a list of best paying jobs for business majors (“15 Best Paying Jobs for College Business Majors: 2016.”
The list was compiled using data from Payscale.com, including their list of most popular jobs for business graduates and their College Salary Report (which considers a sample of 1.4 million college graduates). According to the article, the salary listed is comprised of base annual salary or hourly wage, bonuses, profit sharing, commissions, and other forms of cash earnings (ironically, equity compensation isn’t included). It’s also not a starting salary; it’s for someone who is mid-career (about 44 years old with 15 years of experience).
The article reports that the median mid-career pay for business administration majors working as stock plan administrators is $120,000. Some of the jobs that stock plan administrator came in ahead of include tax compliance manager; treasurer; and payroll, accounting, finance, and budget directors.
As an English Lit major, however, I take issue with the article’s suggestion that humanities majors need to change majors. I know plenty of liberal arts majors who have ended up in stock plan administration. So if you know any soon-to-be college graduates (business or humanities majors), you might want to suggest they follow in your footsteps.
Honestly, I anticipated that the Bush-era tax cuts would lapse at the end of this year–and I know I’m not the only one. It’s is unusual for Congress to be this active this late in the year. But, yesterday the Senate did approve the tax plan which includes an extension of those tax cuts for two more years. The bill is up for a vote in the Senate today and is expected to pass. (See this article from Reuters.)
So, if your company has been grappling with what, if anything, should be done in anticipation of tax increases, you’ve just been given a couple more years to sort through the issue. If you are wondering what in the world this has to do with your stock plans, since employers can just use a flat rate for withholding on equity compensation, then you must have missed our July webcast, How Upcoming Tax Rate Changes Impact Your Stock Plans. Don’t worry; the full webcast and transcript are still available!
Where this bill could really hit home is this: In addition to the extension of the individual tax rates, the bill includes a one-year decrease in payroll taxes. Specifically, the 6.2% Social Security tax paid by employees would be reduced to 4.2%. Employers would not be given the same tax holiday; employer “matching” stays at 6.2%. The bill doesn’t appear to impact the changes to the Medicare portion of payroll taxes, which are set to increase from 1.45% to 2.35% for wages above the threshold amount starting in 2013. (For more information on the implications of the Health Care and Education Reconciliation Act of 2010, check out that great webcast I mentioned above.)
If this bill does pass, there are a few things you will want to be sure and prepare for. Obviously, you’ll need to make sure to update the Social Security tax rate in your stock plan administration database. Additionally, it will be a good idea to sit down briefly with your payroll department to confirm that there won’t be any glitches exchanging Social Security withholding and year-to-date levels after the payroll system is updated.
On the communication front, this isn’t really the kind of issue that warrants a whole campaign. It’s not confusing and lower taxes are always well received. It is, however, a great reminder of the value of a good disclaimer. Your educational materials, particularly those pertaining to taxes on equity compensation, should have a disclaimer that includes verbiage indicating that the information in the materials may not reflect current regulatory developments. This bill would mean a pretty straight-forward decrease in tax withholding, but the next development may not be so simple. Having a quality disclaimer helps protect the company in case there is a delay in updating your educational materials or if employees are inadvertently referring to outdated printed material. If you’re feeling ambitious, a handy little asterisk notation on any examples you have available to employees noting the one-year reduction in the Social Security withholding rate would be fantastic.
Finally, and maybe only after the dust settles from the changes that 2010 has brought us, take a look at what 2013 might look like for your employees, particularly those making over $200,000 annually, and decide if there are any changes your company may want to implement in anticipation of the tax rates increasing.
Ownership guidelines (i.e., policies that place requirements on how many or how long shares of company stock are held by executives) are a way of ensuring that executives have an adequate amount of “skin in the game” when it comes to the long-term success of the company. Equity compensation for executives inherently boosts a personal interest in the company’s growth–the higher the stock price, the higher the reward. However, it can also come with the risk that executives may be prone to more high-stakes behavior that results in short-term returns instead of long-term growth.
Much of the legislation and regulations that has been introduced or finalized over the past year has incorporated some component of risk management and/or “Say-on-Pay.” I suspect that this will result in not only more companies that initiate some form of stock ownership guidelines, but also change the type of policies that we see. Companies must disclose any existing stock ownership policies–shareholders are likely to be on the look for them as they prepare to vote for or against executive compensation.
Types of Ownership Policies
There are basically two ways in which a company can regulate share ownership: how much and how long. This study, published on the 13th by Frederic W. Cook & Co, shows that the most popular policy to be a straight-forward “how much” approach: requiring the executive to hold a minimum amount of shares based a value equal to a multiple of cash salary, a specific number of shares, or a percentage of net profit shares. Unfortunately, this “traditional” ownership policy alone doesn’t necessarily provide the long-term focus that shareholders are looking for, especially if executives may simply leave the company and cash out.
Imposing a holding period on exercised/vested shares extends the amount of time executives are impacted by strategic decisions they make today. Holding periods are typically placed on a percentage of the net shares from transactions. They may range from one year from the transaction date to a period after retirement/termination. (The most popular holding period found in the Frederic W. Cook & Co. study was one year–I’m curious to see what next year’s study will show.)
RiskMetrics Group
The RiskMetrics Group launched its Governance Risk Indicators TM (GRId) in March of this year. The rating system in the GRId supports both types of ownership policy, with the highest score going to policies that require a value of shares at 6x salary to be held and a holding period on at least 50% of net profit shares that goes to or beyond retirement/termination.
7th Annual Executive Compensation Conference
If you’ll be in Chicago next week for our 18th Annual NASPP Conference, you’ll have plenty of opportunities to take in great sessions on risk management & “Say-on-Pay”. Also, don’t forget that your registration to the NASPP Conference includes access to the 7th Annual Executive Compensation Conference, which boasts a special “Say-on-Pay” track of panels and sessions addressing executive and director share ownership policies.
If you can’t make the Conferences in person, or you find that you are torn between multiple sessions, don’t forget that we will be recording all the sessions. You will be able to purchase the recorded webcasts individually, as a custom package of five sessions, or get access to the entire set. Even better, it’s not too late to take advantage of the 10% discount!