How We Tackle the Challenges of Managing Complex Employee Stock Plans
Sheila Matias holds certifications including CEP, GRP, CCP, and CBP, and is the current President of the Ohio Chapter of the NASPP.
I started out in the world of equity programs, just supporting them. It was pretty straightforward back then, dealing with one or two types of equity and just managing one analyst.
Fast forward a bit, and I found myself working for a small US public multinational company. Suddenly, I had to juggle multiple equity types, handle a small expat crowd, and oversee a couple of direct reports. It was a step up in complexity, but I was ready for the challenge.
Then came the big leagues – a large US public multinational company operating in over 75 countries. Now we're talking about all sorts of equity types, a huge expat and cross-border population, and a team of eight direct reports spread across two countries.
So when companies are moving forward implementing their employee stock plans: Experience matters. Large companies have many complexities to consider. Some of them are known, but it’s the unknown ones that will cause you the most problems. Here’s our top things we recommend to our clients for handling complex employee stock plans.
Start with a good stock plan platform with flexibility to manage complex plans:
In my experience, it's crucial to choose a stock plan platform that offers flexibility and/or customizability to handle the complexities of our equity programs. Distribute a detailed RFP that includes questions from all internal teams (HR, Tax, Accounting, Payroll, etc) in order to ensure that you find a comprehensive solution not only for Stock Administration but across all functions. Also, you want to look for a vendor that continues to invest in its platform, technology and service options for both the participants and the administration staff. Ensure that the vendor not only supports your current requirements but also any anticipated changes that you intend to make over the next several years.
Here's a good primer on the best equity management platforms from my colleague, Justin Docter.
Look for excellent CSMs and RMs at the stock plan vendor:
From past implementations, I've learned the importance of having dedicated Customer Service Managers (CSMs) and Relationship Managers (RMs) at our stock plan vendor. These professionals provide invaluable support and ensure smooth operation of the platform. Of course, no vendor will tell you they don’t have excellent CSMs and RMs, but you should still be on the lookout for any signs that a vendor prides themselves on them. Ask for average tenure of CSMs and RMs, financial reporting team and other individuals who would be supporting your account. This will give you a sense of whether their employees are loyal and will most likely stay on your account unless promoted or assigned to another area within stock plan services.
You can never have too many integrations:
Seamless integration with our existing systems is essential for efficient stock plan administration. Look for a platform that integrates smoothly with our payroll, HRIS, and tax advisor platforms to minimize errors and streamline processes. Missing integrations mean more work, less efficiency, and even some risk of errors. Most platforms will offer some integrations so make sure you account for them!
Global capabilities:
As we expand internationally, it's crucial to choose a platform with strong global capabilities. Ensure it supports diverse regulatory requirements, multi-currency functionality, and localization features to cater to the needs of our global workforce. This is almost more important if your company isn’t global, because it may be in the future and you want your tech tools to be future proofed.
Create global relationships with local individuals in non-US countries:
Spend the time and resources to develop a good working relationship with a local team member in your non-US based countries. Bringing them into the process will save lots of potential misunderstandings during your implementation. Leveraging their expertise ensures compliance and effective administration of our stock plans abroad.
Have access to legal and tax advisors:
Your company probably has an internal general counsel or legal team. But you still may need external advisors who have the technical expertise and know the legal and tax rules in all countries. Having access to experienced legal and tax advisors is essential for addressing regulatory and compliance challenges. These professionals provide invaluable guidance on tax implications and legal considerations, helping us mitigate risks and ensure compliance.
Checklists for processes:
Developing comprehensive checklists for stock plan processes ensures consistency and accuracy. I recommend creating detailed checklists for each stage of administration to streamline operations and minimize errors. In addition, external auditors will request to read/view SOPs/checklists so having them in place are always a best practice.
Many project management systems have their own SOP creators, here's a free one we've used in the past from ClickUp.
Risk and controls matrix with roles and responsibilities identified:
A risk and control matrix is a tool used in risk management and internal control processes. It outlines potential risks faced by an organization along with the corresponding controls put in place to mitigate those risks.
In essence, it helps organizations identify and assess risks to their operations, finances, and reputation, and provides a structured framework for implementing controls to manage or mitigate these risks.
Typically, the matrix includes a list of specific risks, such as fraud, data breaches, regulatory non-compliance, etc., along with corresponding control measures designed to prevent, detect, or correct these risks. Each control is also linked to the roles and responsibilities of individuals or departments responsible for its implementation and monitoring.
By using a risk and control matrix, organizations can systematically evaluate their risk exposure, ensure appropriate controls are in place, and enhance overall governance and compliance efforts.
Reconciliation monthly and quarterly:
Regular reconciliation of stock plan data is essential for maintaining data integrity. I recommend conducting monthly and quarterly reconciliations to verify data accuracy and identify discrepancies promptly. This is a must prior to finalizing the financial statements and should be part of your SOX processes.
Top-notch reporting capabilities:
Comprehensive reporting capabilities are essential for tracking and analyzing stock plan activity and/or transactions. Look for a platform with advanced reporting features to provide actionable insights and support informed decision-making. Some important items to confirm: applying different currencies and exchange rates to reports, availability of user-defined fields to tag grants for filtering purposes, scheduling of reports along with grouping capability for efficiency.
Bring in an education/communication consultant:
Communication is key when it comes to engaging employees in our stock plans. Making a fantastic equity program only to have poor understanding from employees defeats the purpose of granting equity to employees. I wrote a whole other article about it in fact. I recommend bringing in an education or communication consultant to help effectively communicate plan details and benefits, fostering understanding and participation among employees. Many stock plan vendors have experienced communication consultants who can work with you on customizable communications.
Naturally, my team and I at CompIntelligence can be helpful on this one. But really, we can be helpful to your entire process. If you’d like us to take a free, no-pressure look at your implementation plans and give some recommendations, get in touch with us here.
