How to Communicate Share Plans Effectively | by Jane Darlington
Stitch Communications
But what (and how) are you telling your employees about this fabulous benefit?
It’s simple isn’t it? Grab a few words from your plan rules (or cut and paste from last year), an image from marketing and ask IT to send out an email or get an agency to make you a lovely brochure and send it to home addresses. Then hope your employees click, read and understand.
But do they? Emails get forgotten, missed or deleted, junk mail gets binned, people go on holiday, have busy lives or simply don’t understand what you want them to do.
Effective communication is key to the success of any equity plan. Fail to get your message across and employees just switch off.
Here are a few tips to help you tune up your communication.
Be clear
The words you use and the way you talk about your share plan will go a long way to helping your employees to understand what it is and how it works. Remember, you’re the expert – not them. The words you use need to reflect this or they’ll be off making a cuppa in the time it takes to say merchant banker valuation.
Try getting someone ‘normal’ to read your words once they’ve been written.
Know your audience
Who are you talking to? Engineers, call centre agents, the chief exec? What’s happening in their lives will have an influence on what they need to hear from you – and the decision they make.
We know that you know your stuff; you sleep, breathe and eat share plans. But spare a thought for your readers – they will have a range of experience of share plans; from none, to some.
Focus on what they need to know to make their decision – not telling them everything you know about plans.
Choose your channels
Do you post payslips home, send round newsletters or does your MD regularly blog on your internal TV network? We’re lucky we’ve so many channels at our disposal these days. But it can cause confusion; should you use all of them (expensive?) or risk missing people if you only pick a couple?
Consider using a range of channels and let your employees choose. Try not to make assumptions – just because they don’t have a work PC doesn’t mean they don’t have access to the internet!
Be inspired
I know this goes against the grain in the highly regulated world of equity, but why not try some new creative ideas and use your imagination? Your employees are much more likely to sit up and take notice if the communication stands out.
Being creative in what you say and how you say it will make all your efforts with plan rules, tax, legal, and administration worthwhile.
Make it clear, accessible and engaging
Yes, it does mean asking lots of challenging questions and sometimes doing things a little differently. But if you really want your share plan to be heard over the noise of everything else, an effective communication campaign is the answer.
Jane Darlington, Stitch Communications.
Jane.darlington@talkwithstitch.co.uk
For award winning communications talk with stitch info@talkwithstitch.co.uk
http://www.talkwithstitch.co.uk/
Implementing an ESPP that is a Pre-Tax Earnings Plan by Denise Scoville-Glackin and Patricia Boepple
We
find this question coming up time and time again and thought a good
synopsis and case study may help you if you’re researching ESPPs that
are Pre-Tax Earnings Plans. A Stock Purchase Plan to accomplish a
Pre-Tax Earnings Plan will require Board approval with delegated
authority to executive management for operational items. The Plan must
comply with ERISA and should be designated as an ESOP. Shareholder
approval not required for shares purchased at market value, but is
required for matching shares issued by the company.The Plan Term is typically ten years and may offer the ability of the Board to terminate the plan earlier.
Participants
Employees of the company and its holding companies or subsidiaries, as approved by the board, which have been employed by the company for 30 days prior to the beginning of open enrollment.
Enrollment
Open enrollment will occur each calendar year in the six-week period beginning on January 1. During enrollment a participant must elect when they will receive their shares. Participants may elect to receive their shares three years following the purchase date, or any date annually thereafter, up to ten years.
Contributions
Employees may elect to contribute pre-tax earnings in the amount of 1 to 10% of base compensation (no over time, bonuses or other compensation) up to $25,000 annually. Participants, and their contributions or shares, will be unsecured unfunded general creditors of the company.
Purchase Period
Each purchase period will begin on the first business day of the calendar year following enrollment in the purchase plan. The purchase date will occur on December 15 of the same calendar year.
Stock Purchases (Timing of purchases and matching shares is flexible, as long as this is communicated to employees prior to their enrollment in the plan, and their enrollment in the plan occurs in the calendar year prior to their earning the compensation that is diverted to the plan,)
Stock purchase will occur each year on December 15. If December 15 is on a weekend or holiday, the purchase will occur on the next business day which the company shares are traded. Employees purchase whole shares and any excess funds will be returned to an employee through their pay, at which time the refund will be taxable compensation to the employee. Each participant will receive an additional 15% of whole shares. The purchase and matching share will be based on the closing share price of the company.
Income / Taxes
On the date chosen by the employee at enrollment to receive the shares, the employees will recognize the value of the shares and the matching shares as income on their earnings statement and Form W-2, and taxes related to this income will be withheld from the employees’ earnings, or the employee may be asked to provide the company with a check to pay for the withholding taxes due upon the release of the shares.
Purchase Limit
Each participant is limited to $25,000 in contributions annually.
Withdrawals
Participants may withdraw from the purchase plan at any time during the purchase period, except during the last two weeks of the this period.
Terminations
Participants whose employment is terminated may not purchase shares on the next shares purchase date and will receive a refund of all contributions made to the purchase plan that have not been used to purchase shares, except for participants’ whose termination is due to death or disability. Participants whose termination is due to death or disability will purchase shares on the purchase date following their termination and in the case of death the shares will go to the participant’s designated beneficiary or estate.
Transferability
Until the shares are issued to the employee they are not transferable.
Leave of Absence
As long as an employee is receiving base compensation, contributions to the purchase plan will continue.
Plan Expense
The expense of the plan will be the value of the matching shares that are issued at each purchase. If there are further vesting restrictions on the matching shares, the expense of matching shares will be more complicated. This value of the matching shares will be tax-deductible as an employee benefit expense. There will also be the expenses related to administering the program.
Still Intrigued? We will be happy to work with you to implement and discuss further the details. Email: info@globalshares.com
Posted in Uncategorized
Leave a comment
Automating Your Equity Compensation Plans: How it can save time, money and reduce overall risk in managing your plans by John Bagdonas
Equity
compensation is becoming increasingly important in helping companies
attract and retain key employees in the increasingly competitive
marketplace for talent. Equity compensation represents a form of
ownership in the company and provides employees with a vested interest
in making sure the company runs well – the better the company performs,
the better the employees and the company interests are aligned.
What is Equity Automation?Equity automation is the term we use to describe the process of automating the administration of your equity compensation plans. Historically, the recordkeeping of equity awards tended to be a highly manual process, usually involving the use of spread sheets to track grants, manage vesting schedules, and relay pertinent information to employees via an annual statement, or other manually created documents. This has been especially true for smaller start-up companies and other private or public firms that have not relied as heavily on equity awards.
By automating or streamlining the administrative process, companies can gain many benefits including: reduced costs of the program, reduced time and resources to manage the plan, an improved participant experience, and an overall reduction in the potential risks of transactional or reporting errors inherent in a manual process.
Features
Online/no longer paper based
The most straight-forward method of automating your equity compensation practices is to get your recordkeeping online. This means you can get all employee inquiry and transaction access online and can eliminate the need to produce any more paper statements or notifications. Online employee access can also significantly reduce the number of inquiries that need to be handled by your in-house plan administration group.
Syncing Systems
Once the records and employee access is online, automation means that you can “connect” other support systems to your equity awards administration system streamlining the entire process. In this way, payroll, HRIS, tax, accounting, financial reporting and other applications can be connected or “synced” to further automate the administration of your plans. This also helps to track your globally mobile employees and ensures compliance with the multiple taxing jurisdictions, including US State-to-State mobility.
Saving time and money
Equity automation also facilitates significant time and resource savings – freeing-up resources for other mission critical activities, not to mention improving the overall experience and satisfaction of your employee participants. What’s more is that by leveraging the benefits of Equity Automation, you can also greatly reduce the material costs associated with a more traditional approach – i.e., reduced paper/statement costs, reduced postage, reduced handling expenses, etc.
Reducing risk
Automating the process decreases the chance of manual errors meaning you have one less thing to worry about! Equity Automation can significantly simplify your internal audit process and boost your confidence in, and control over. your equity compensation practices. Such control can have a material impact on the financial reporting and results of your company.
Summary
In conclusion, equity automation can help you! It improves the overall effectiveness of your plans and can be a key driver in reducing expenses, eliminating process risk, and enhancing the experience for your plan participants. Equity automation minimizes the busy work so you can focus on the creativity and quality of your plan. Let Global Shares do the work for you and create the best equity package out there.
By John Bagdonas
To find out how Equity Automation can work for your company, talk to Global Shares today!
Email: info@globalshares.com
The Basics of Equity Compensation: How It Can Boost Employee Performance And Company Returns
The Basics of Equity Compensation
What is Equity Compensation?
Equity compensation is when an employee is given a bonus that follows the progress of the company’s stock. While many employers give their workers cash bonuses and pay rises, equity compensation is a relatively under-used method of rewarding employees and comes with some significant advantages for employers. The most common way to give equity compensation is through stock options but employees can also be given other forms of bonus such as restricted stock (which employees can sell once certain conditions have been met) and stock appreciation rights.
Equity compensation represents a form of ownership in the company and provides employees with a vested interest in making sure the company runs well – the better the company performs, the better their own stock gets! At a later stage your employees can choose to sell or transfer their stock, hopefully netting themselves a significant bonus. Since most employees don’t cash in until they leave the company, you are giving a bonus that keeps on growing as long as they are working for you.
What is the problem with cash bonuses?
In most companies, a hard-working and successful employee will be given cash rewards which he will then spend on treating himself – perhaps a new television, or a holiday somewhere nice. Just a few weeks later though and the employee has almost forgotten the bonus! That television isn’t so exciting anymore – and the holiday? Rapidly becoming a distant memory.
A cash bonus is nice at the time but is a one-off; the bonus and the motivation that come with it soon run out. While they are good for a time, your employees do start to take them for granted, they are no longer special but a regular factor in employment. When cash bonuses are expected and available in many companies they no longer serve as motivation to prevent someone leaving for another job.
Why do non-cash rewards motivate employees better?
Non-cash rewards such as equity compensation are a fantastic way to motivate employees! These types of bonuses directly link the financial well-being of your employees with the financial well-being of the company. As company shares go up and down the value of their bonus goes also fluctuates. When a team performs particularly well they can see how this not only helps the company but helps their own situation – this is a powerful incentive to keep individuals working hard! Daily tasks that may seem onerous and boring take on a new significance as they start to directly affect your employees. And when there is a bad quarter it will hit them where it hurts. They’ll be motivated more than ever to strive for more.
The relative rarity of non-cash rewards mean that employees are highly motivated to stay at the company and progress their career there rather than seeking greener pastures. Employees frequently move job because they get the same types of bonus and pay elsewhere, they simply choose to go somewhere else as soon as they are offered that little bit more.
In conclusion, equity compensation benefits employers as well as employees. Employees feel more valued and gain a bonus that genuinely benefits them. Not only this, but the bonus that they gain when they choose to sell their stock is linked to how well the company does – the harder they work the more it is worth! This can encourage employees to work harder and stay longer in the company. Employers of course benefit from happier and harder working employees and as a result the whole company benefits. While you are giving away stock, you are also increasing the motivation for your employees to work harder thereby increasing the chances of your stock rising further in the future.
To find out which equity plan is right for your company, talk to Global Shares today!
Email: info@globalshares.com
GEO Conference 2014, Miami, Florida by John Bagdonas
“New York, London, Paris, Munich, everybody talk about……….”Well, for those of you old enough to remember the late 1970’s, I’m not referring to the 1979 hit “Pop Muzik”, but actually to the locations of the GEO Annual Conference over the last several years. What everybody is talking about, though, is next year’s conference, which will be in beautiful Miami Beach, Florida in the US.
Save the Date: Celebrate 15 Years of GEO Conferences With Us in Miami Next Year!
GEO’s 15th Annual International Conference will be held at the legendary Eden Roc in Miami, FL from 7 – 9 May 2014. It will be an event not to be missed as we celebrate 15 years of GEO Conferences in a place full of history.
The Eden Roc Miami Beach Hotel is an iconic resort hotel destination in South Florida with a rich history. As described in Wikipedia, it was designed by Morris Lapidus, in the Miami Modern style, and was completed in 1955-56. The Eden Roc has been a favorite of distinguished guests from politicians to Hollywood’s top stars. The Eden Roc was built on the site of the Warner Estate following litigation over development rights to the site and to the neighboring Firestone Estate, which became the famous Fontainebleau Hotel.
The hotel was named after the Eden Roc pavilion at the Hotel du Cap-Eden-Roc in Antibes, France. The hotel housed the Cafe Pompei, a supper club that offered entertainment with dinner. The Mona Lisa Room was an intimate formal dining room, and Harry’s American Bar (named for Harry Mufson) was the hotel’s nightclub.
From its oceanfront tower, 17 bungalow suites, four pools, two restaurants, and spa, the Eden Roc’s focal point is an oasis of pools, water features, and gardens, threaded with walkways and intimate seating areas.
For those of you with an interest in film or television history, the hotel was featured in several episodes of “I Love Lucy”. When the Ricardos and the Mertzes traveled to Miami, they stayed in the Eden Roc Hotel. It is also featured throughout the finale of the film “Married to the Mob”.
John Bagdonas
Stock Option Valuation – An Introduction
Understanding
the valuation of stock options can assist you with assessing your
compensation package and make sound choices about how to manage your
stock options. Options give you the opportunity to purchase or sell
your affirmed amount of shares of stock at a fixed price within a fixed
time. Note that you are not obliged to use the option. The “fixed” price
at which the option is exercisable is called the “exercise price,” or
the “strike price.”Valuation Shortcuts
Valuations are required for stock options distributed by both public and private corporations. Option values can vary depending on the instability of the fundamental stock and the intensity of interest rates, among other dynamics. Furthermore, the type of valuation model used will depend upon the intricacy of the fundamental option and the amount of model flexibility mandated. An added measure of valuation is needed when the option is given by a private corporation, as the value of the fundamental stock must initially be decided prior to the option being valued.
Understanding Stock Option Valuations
The value of stock options is composed of two elements. The first, known as intrinsic value, gauges the paper profit that is accrued at the time stock valuation is determined. For instance, if your option offers you the opportunity to purchase stock at $15 per share and the stock is trading at $18, your option has an inherent value of $3 per share.
The option has added value formulated on the probability for better profit if you resume holding the option. This component of the value differs depending on the expanse of time until the option runs out, amongst other aspects; hence, it is termed time value of the option. The “value” of a stock option is the quantity of its inherent value and its time value.
It is imperative to grasp that option value is not a prognosis, nor an approximation of the possible upshot from continuing to retain an option. Your option may have a value of $8 per share, but wind up generating a profit of $30 per share, or perhaps no profit at all. Option value is helpful data, but it does not portend the future.
Continue following the Global Shares Blog for more equity-related articles!
So, just what do your employees know about their equity plans? By Denise Scoville-Glackin
When I attend benefits exhibitions and speak to employees receiving equity plans, I often find that they don’t have a good grasp of the equity package they are receiving and that’s before we even mention what they can do with it! It’s easy for us in the stock plan industry to forget just how complicated and confusing equity plans can be for employees. Communication is so important for effective participation, let’s take a closer look.
We need to start by asking some basic questions like what is the best way to communicate the plan, what type of information do your employees need to know?
When an employee first joins a company, the information and on-boarding process can be overwhelming and a booklet outlining the company’s equity compensation plan may find its way under a pile of unread paperwork. At Global Shares, we recommend considering an electronic form of communication and looking for more creative ways to get your message across. Perhaps you could try a series of pre-recorded tutorials explaining the benefits of participation. Or maybe a more general online and printable document of definitions would work – to cover the who, what, when, where and why of the plan.
Of course having these tools is only the start. The accessibility of the plan is just as important. Where should this information be stored and how quickly can the employee get access to it? How will you communicate this to your employees? How will this data be maintained and reviewed for accuracy? All good questions – one point to keep in mind is that accurate and easily understandable information is much better received than a general overview with little or outdated supporting documentation. Whether the plan is designed for retention, growth, or compensation; the success of the plan is measured by the level of employee participation – hence the importance of effective communication and education.
I recently met with one company’s administration team at an industry conference. They mentioned that they had created custom video cartoons to breakdown every step of their stock option plan. They included the grant acceptance, vesting, exercise and the definition of taxes that may be due as well as the sale. What a unique idea! Of course my next question was how long the video is? Surprisingly the video was just two and a half minutes long and really got the point across. Not to mention that it’s a nice quirky and creative techniques to put out there!
My final thought is that we should really take the communication of equity schemes seriously and take the time to consider how best to do this.
Questions? Get in touch today to find out how we can optimize the communication of your share plans to participants!
Denise Scoville-Glackin
Posted in Uncategorized
Leave a comment
