Global Stock Plans: What are they and how do they operate?

A global stock plan is, as the name suggests, an employee stock-based plan that a business can operate across multiple jurisdictions. A global plan can offer many benefits to employees and employers, such as:

• allowing the global workforce to share in the company’s success.
• providing employees with financial incentives above and beyond cash-based awards
• helping to creates a strong sense of loyalty and connection to the company.
• offering customization to meet the needs of employees around the world.

Globalizing a stock plan can be complex, however careful planning from the start, along with a strong communication strategy, can help. Here we will discuss seven key considerations for you to be aware of when looking to implement a global stock plan.

Set objectives for your global stock plan

Employee equity plans should have a clear objective. What exactly do you want the plan to achieve? Without this, companies may find the design and implementation processes inefficient, potentially leading to a low program participation rate or uncertainty about how to measure the success or otherwise of the plan.

Here are some common goals we’ve heard from our clients:

• attain employee engagement via employee ownership.
• retain/attract talent in certain regions.
• celebrate a company milestone by rewarding employees.
• unite international employees with a common goal.
• be an integral part of the company’s international culture.

Having clear objectives implemented from the start can help you to choose the most suitable equity awards, design proper vesting schedules and plan your communications strategy. Careful planning at the outset can help set the path for success further down the path.

Use the same equity type across the board or not?

It isn’t unusual that companies may want to launch the same stock plan or equity awards in all jurisdictions, especially as it can seem like the simplest solution. However, just because it’s possible doesn’t mean it’s always the ideal way.

Using the same plan across the board may reduce the administration workload, but it’s likely to cause some other issues. For example, it’s possible to offer an employee stock purchase plan (ESPP) outside the US, but some of the features may prove problematic in other jurisdictions such as plan contributions being payroll deductions only. In addition, non-U.S. employees may not qualify for the same tax benefits as U.S.-based employees.

Understand local laws and regulations

If it proves challenging to apply the same plan to every country you operate in, one option might be to seek to customize for your local employees. You can start by answering the following questions to give yourself some basic understandings about local laws and regulations as well as market practices associated with equity compensation.

1. Are there any restrictions/local regulations: when offering particular award or plan in particular jurisdictions, e.g. local payroll tax withholding and reporting obligations, payroll deduction limitations, securities filings, foreign exchange restrictions, etc.
2. Time and effort: e.g. how long will it take to complete documentation filings in the countries where you want to launch the plan? Do you have enough resources to stay compliant with the local laws and keep abreast of all the global changes impacting stock plans?
3. Cost required: Are the admin, legal and accounting costs a concern?
4. Employee considerations: e.g. what are the tax implications and what communications strategies might you need to implement to promote the plan?
5. Market practices: e.g. what are your competitors offering locally? Any country-specific tax advantaged plans in those regions?

Consider the local culture

Some countries don’t have a strong culture of employee ownership and employees there may not understand or see the benefits of equity compensation, therefore they may not appreciate being offered equity awards.

So, in your rollout schedule you don’t have to include all countries at the one time. Instead, you might choose to prioritize the jurisdictions that are more receptive to equity compensation and might take less time to go through filing or other compliance issues, while considering more in-depth education and communication strategies for other regions that need them.

Digitize the process

If you’re operating in multiple jurisdictions and in multiple languages, it is inevitable that the level of complexity in your stock plan will grow. Spreadsheets don’t scale with your business as your ownership plans do.

Using an equity management software like ours at J.P Morgan Workplace Solutions can help to keep the data accurate and administer all equity plans effectively. With thousands of employee datasets, multiple equity awards/plans and different vesting schedules, tax rules, regulations and all the other moving elements in an employee stock plan, it is likely to soon become out of control if you’re not using a digital platform.

In our recent Trends in Equity Compensation survey, we discovered that 63% of public companies choose to outsource all, or part of, their equity compensation management to a professional third party provider.

Operate in their language (and currency)

Stock plans are already new to lots of people. The language barrier and having to use an unfamiliar currency will only make the learning curve steeper for your employees.

Our software solution features a participant portal that allows participants to have 24/7 personalized access to their equity account for easy trading, tracking and management. Not only is the portal in their language and currency, but our support team can also serve them in their local language.

Customize your communications strategy locally

If you are operating across multiple countries, it’s likely that you are targeting a large base of employees to join the plan. In this case, make sure to localize your communications programs.

Not only does this require translated materials, contracts and documents, but also an understanding of cultural norms and traditions will be required to make your comms plan more relatable and engaging to local staff. For example, is the concept of equity compensation new to the country? Would it help if you explained more about why the company is providing this benefit as well as the benefits of the plan?

In addition, using simple language that even the least financially savvy employees can comprehend and maintaining regular communications at every stage of the process can help your employees to feel engaged and informed.

One option might be to share stories of employees who have already benefitted from the plan. This could work to positively impact those who are hesitant to join and help employees connect with their counterparts around the world, by hearing about their experiences. It can help to make it relatable.

J.P. Morgan Workplace – Your global stock plan service provider

As a global stock plan service provider, not only do we provide the equity management software, but also offer a team of equity plan specialists and a client manager to help guide you through the steps from plan implementation and administration to legal, tax, compliance and reporting. Our built-in online portal for participants is also available to allow them to view, track and manage their equity holdings via our support desk.

Leverage our extensive local knowledge and global reach. Contact us today