More than 200 public and private companies recently participated in our stock plan administration benchmark survey. From technology providers to healthcare and pharmaceutical companies, there was a wide range of participation across industries and equity plan design. Here is what we found to be true around how teams are spending their time, weaknesses and strengths in regards to technical skills, and a few ideas on how you can improve processes.
Stock options have been granted to executives at a regional airline for many years. After losing two senior executives to competitors recently, the airline’s board decided to award performance shares in order to provide current year income on vested shares through dividend equivalents. Dividend equivalents are payments of cash or additional company stock an executive receives after the units vest. While stock options do not pay dividends, dividend equivalents can offer executives the flexibility to increase or supplement their income. This example explains the benefits and how they work.
If you’re as much into stock plan education as we are, you’re probably also really into survey data. That makes today a good day for both of us at this blog. We have been perusing the 2015 Global Equity Incentives Survey by PricewaterhouseCoopers and the NASPP. The survey presents questionnaire data from 245 multinational companies with employees in 75 countries. The researchers found that the use of equity awards by the surveyed companies generally continued to grow in 2014 and 2015, after falling in 2009–2011 and rebounding in 2012. With this growth in the use of equity has come an expansion in stock plan education and communications.
As the year winds down, there are a few dos and don’ts that may impact how your participants plan to exercise vested stock options before year-end. In order to make sure employees get the most value out of their equity awards, it may be helpful to provide some considerations for equity compensation planning.
Whoever coined the phrase “cash is king” wasn’t talking about executive pay, which as you know has become increasingly weighted toward equity compensation. Has the complexity of executive compensation trumped clarity in executive financial planning? That’s the challenge for today’s C-suite executives. The longer executives have worked for the company, the more likely they have accumulated various combinations of executive compensation and rewards. Over the course of a decade or two, the mix can include stock options, restricted stock grants, stock appreciation rights, employee stock purchase plans or performance arrangements. Few executives would say they have a good grasp on the particulars of their company stock holdings, tax treatments and a game plan to optimize these rewards.
A modification is a change in any term of an award that is not included in your original equity compensation plan such as a change in number of shares, exercise price, transferability features, settlement provisions, or vesting conditions. Modifications to awards can result in additional compensation expense for the company. Below are a few examples of common events that trigger modification accounting, as well as those that do not.
On February 24, 2014 the Securities and Exchange Commission established the Office of the Investor Advocate. According to the SEC, the purpose of the Office of the Investor Advocate encompasses three core functions: (1) to provide a voice for investors, (2) to assist retail investors, and (3) to support the SEC’s Investor Advisory Committee.
When building an equity compensation plan, companies have to consider which employees will be eligible to receive equity. Are you looking to develop an executive-only plan focusing on senior management or a broader program where all employees may participate? Both have their pros and cons, and pulling guidance from larger corporate goals and vision can help you lay out a plan that will drive the right results.
Communicating an equity-based compensation program requires effective collaboration of multidisciplinary internal stakeholders (e.g., finance, human resources, legal) and external service providers (e.g., brokers, transfer agent, software vendors). Thinking of each of these parties as members of your stock plan communication team will help to break up the responsibilities and coordinate efforts to work towards a common goal – increasing participant satisfaction with the equity plan.