Equity management software (often called a Stock Plan System) is a specialized tool that companies will adopt as they scale and need help to manage their stock compensation plans. Companies that are preparing for an IPO in particular are often obligated to adopt equity management software, but sometimes private companies that are growing quickly as well. These systems are vital for ensuring you effectively administer your stock plans to employees while minimizing compliance risks and errors.
In this article, we’ll break down some of the best stock plan solutions in the industry. While there are many similarities, each software has its strengths and features that make it best for specific types or phases of business needs. It’s important to say at the outset that this isn’t a ranking of equity management software. Most companies will choose a platform or system that fits their needs, compliments their existing systems, and is a good fit for their company size and budget.
First Things First: Combined vs Independent
When you’re researching various solutions for your Equity Management needs, the first place you should start is by looking at existing relationships and software platforms your company is using for other investment services like wealth management, executive financial services, and your company 401k. Large financial services firms like Morgan Stanley and Fidelity will already offer tools for Equity Management Software within their service umbrella. These may be standalone branded products, like Morgan Stanley’s “Equity Edge Online” and “Shareworks”, or they may be a feature within their “all-in-one” software. You’ll often gain efficiency by keeping everything under one umbrella. Some of the most popular platforms are:
Independent Providers
If you're not using a broker that offers an equity management software, or it’s not a good fit for you, then you’ll be looking at independent providers that offer a standalone solution, of which three of the most popular options to choose from include:
Certent EM
Certent EM from Insight Software stands distinct from Carta and OptionTrax, offering a broader range of financial and operational performance reporting solutions. While Carta and OptionTrax predominantly focus on equity management and cap table handling, Insight Software extends its services to disclosure management, financial reporting, and budgeting. It provides businesses with tools that help in making informed decisions by giving them a comprehensive view of their financial health and operational efficiency. This aids companies in identifying trends, forecasting future financial scenarios, and strategizing accordingly.
Carta
Carta, originally known as eShares, provides a comprehensive platform that streamlines the management of equity and ownership for companies.
The primary focus of their software is to facilitate startups and private companies in digitally handling their equity, allowing them to issue, track, and manage shares, options, and other securities without the traditional reliance on paper stock certificates.
Moreover, Carta simplifies the complexities of cap table management. A capitalization table, commonly referred to as a "cap table", is a crucial tool that details a company's equity ownership, and Carta's platform aids in keeping it updated and transparent for all stakeholders involved. This digital approach not only improves accuracy but also enhances transparency and accessibility for investors, employees, and founders.
OptionTrax
OptionTrax is another platform designed to assist companies with their equity management needs. Like Carta, OptionTrax offers solutions for businesses to manage their stock options, restricted stock, and other forms of equity-based compensation.
The platform is known for its user-friendly interface that simplifies the complexities of equity administration, making it accessible for both companies and their stakeholders. It is also one of the only remaining truly independent providers that is not tied to any bank, broker or transfer agent.
An integral feature of OptionTrax is its capability to handle both cap table management and equity plan management. By providing a clear and up-to-date view of a company's equity ownership, it ensures that stakeholders, ranging from employees to investors, have a transparent view of their holdings.
The platform's emphasis on automation and real-time reporting also streamlines the equity management process, reducing errors and enhancing efficiency.
You can take a tour of their software here.
Implementation & Managed Services
Most equity management software platforms offer the basic features needed for stock plan administration.
Making a decision on the best platform boils down to the phase of your company, types and details of current equity plans, the relative ease-of-use you need from the platform, and the software ecosystem that makes the most sense based on the tools you already use.
Most providers integrate their specific software with their other financial service options. So if you already use a specific financial service from one of the software providers, it's worth considering that same company for your stock plan administration platform.
Regardless of your choice, it’s worth it to carefully consider your implementation, training, and ongoing employee stock plan administration needs. For small and mid-sized companies, it’s easy to underestimate the resources needed to smoothly introduce an EMS. It’s common for these companies to hire consultants like CompIntelligence that specialize in stock plan administration to assist with the subsequent implementation of the selected system.
Many companies don’t need a full-time employee for the ongoing administration, but it’s critical nonetheless. For this reason, firms will often retain consultants for managed services to save resources, add the needed subject matter expertise and assist in the overall management and administration of employee equity plans.