Leading the Evolution of Global Stock Plan Management THE TOP TEN BEST PRACTICES IN EMPLOYEE EQUITY PLAN MANAGEMENT

Leading the Evolution of Global Stock Plan Management THE TOP TEN BEST PRACTICES IN EMPLOYEE EQUITY PLAN MANAGEMENT

THE TOP TEN BEST PRACTICES IN EMPLOYEE EQUITY PLAN MANAGEMENT Thinking of launching a new equity plan or making changes to your existing one? Equity plans are undeniably a great way to align company and employee aspirations, but executing, managing and administering them can be a challenge especially as compliance requirements evolve and plan designs shift to suit immediate and future goals. Fortunately, there are guidelines you can follow to ensure that your new, relaunched, or even current plans will be successful and fulfill their goals. The benefits of equity plans are proven, but properly managing these plans requires you to be on top of many tasks, including monitoring compliance issues, managing multiple stakeholder groups, keeping your participants informed and up-to-date, delivering timely information to everyone involved, and more. During its tenure in the employee equity plan services industry, Solium Capital has developed this Top Ten Best Practices in Employee Equity Plan Administration as a tool to help you evaluate new and/or existing plans, to ensure they re meeting their intended functions. Keep the following considerations in mind as you proceed. 1 You can use multiple plan types to motivate a diverse employee set There are many goals for an equity plan rewarding performance, creating value for employees, connecting their performance to the company s bottom line, motivation and retention, and more. However, when you consider how employee motivation may differ from entry-level positions to the C-suite, and the diversity of your participants, it often takes more than one plan type to meet your intended goals. That s why many organizations are evolving their current plans into multiple plan types, such as stock options, share units, share appreciation rights (SARS), tandem SARs, RRSPs, savings plans, share purchase plans, and stock-settled SARs. And it s also why you should consider all your options and goals when choosing which plan types are best suited to your company. Talking to an expert can be extremely helpful in determining this, and can also help you create direction as to the specific details and plan rules required to ensure you reach your intended outcome. 2 Giving your employee self -service options makes plan administration easier for you: Equity-based incentive and savings plans can be effective in aligning company and employee objectives. However, in order to make educated decisions about their assets, employees need to understand what benefits their plans offer, and even better, be able to access and manage their own plans on their own time. Offering your employees the ability to access their accounts online, transact in real time, view their holdings and statements on demand, and more, will increase participation in your plan and your employee satisfaction with it. Organizations that give their employees this control through solutions such as Solium s Shareworks quickly realize the benefits and cost-effectiveness of doing so. 2

3 4 5 6 Supporting real-time market transactions is the way of the future With the emergence of the Internet economy and online banking, timelines for execution are shrinking and employee expectations for rapid return of proceeds are increasing. By giving your employees real-time transaction capabilities, you are empowering them with direct links to the market, immediate trade processing, and the ability to monitor their portfolios from anywhere, at anytime. Organizations who are leading these equity plan initiatives can now provide online executions, with direct deposits to employee personal bank accounts in as little as four days. You can standardize and automate your plan administration Increasingly, companies are choosing administrative solutions that automate processes, reduce the risk of data and transaction errors, and lower the total cost of ownership. By choosing automated solutions, you can ensure consistency and accuracy in processes such as reporting, blackout administration, generating online plan statements, processing share sales, option exercises, automating employee communications, and suspension and termination processes. Centralize your data source to create a singular view As discussed, it has become common for companies to manage multiple plans at a time. As such, it has also become important to integrate data associated with these plans, as maintaining accurate data is vital when you re managing information for employees participating in multiple plans. One way to do this is by having a single data source for all employee demographics and plan details. This will ensure minimal maintenance of data changes due to employee turnover and overlap between plans, activation and contribution changes. It will also ensure that all stakeholders have accurate information on an ongoing basis. Choose a solution that will guarantee accurate record access across departments and locations: In the past, stakeholders may have created and maintained records in their own set of independent reports. These data silos seemed workable until discrepancies crept in and expensive monthly or annual reconciliation efforts were needed. Compliance pressures were increasing while stakeholders were left with records that weren t necessarily accurate. Today, as regulations and compliance requirements evolve and become stricter, stakeholders also require specialized information for their administration and reporting purposes. This is why many leading companies in equity plan management have made the shift to centralized data management, to ensure secure access to reliable records and reports for different users and departments, such as corporate secretaries, HR, payroll and finance. For organizations that want to be efficient and compliant, it s necessary to leverage the best technology to centralize accurate plan records, provide secure access and maintain privacy across all groups. 3

7 Leverage comprehensive reporting tools for audit, control, reporting and compliance Best-in-class governance requires compliance with evolving legislation such as Sarbanes-Oxley, SAS 70, option expensing requirements, exchange requirements and privacy legislation. Today s most effective equity plan management solutions offer advanced reporting tools for expensing stock options, completing monthly securities filings and meeting board and shareholder governance expectations. Online reporting tools providing search-driven reporting functionality, as well as standardized reports, offer users the best of both worlds by allowing them to leverage the standard report templates required for ongoing reporting requirements and monthly filings. Additional functionalities, such as easy exporting to MS Excel and access to a complete data history, grant users the flexibility to manipulate these standardized templates. Higher levels of reporting functionality allow users to create and produce their own reports by selecting required data fields and formats. This functionality allows administrators unlimited reporting functionality, and equips them with tools for any inquiry needs that may develop in the future. 8 9 Control the integrity of your data through system integration Integrating equity plan management with your company s existing systems minimizes the need for manual processes and creates a more efficient and streamlined management system, while also making it easier to analyze and control information access around your company and to external vendors. System integration allows companies that have direct links to HRIS, payroll and treasury systems to support distributed payrolls, multiple currencies, global participants and expatriates. Automating the withholding process also allows them to operate in local currencies, direct the withholdings to a designated corporate bank account, and ensure settlement of company proceeds directly to their designated account, for seamless execution through all systems. Leveraging the proper technology to create direct interfaces between all systems that track and manage this type of information creates a highly efficient back office and is a must for efficient equity plan management. Use one system to manage your global plans and participants For organizations that manage plans and participants in international jurisdictions, there are a number of additional factors they must consider when it comes to stock plan administration, such as managing multiple payrolls, currencies, exchanges, languages and tax regulations. Operating plans globally also requires you to provide tracking ability, convert funds, produce reports that comply with country-specific regulations, and more. From a front-office perspective, online banking functionality, such as electronic fund transfers (EFTs) and wire transfers, is an effective way for organizations to provide their global plan participants with best-in-class services. 4

10 10. Consider outsourcing Implementing and managing equity-based employee incentive plans is a daunting project that requires the management of several elements: initial planning, transitioning and implementing new or existing plans, tracking and managing new option grants, managing and executing stock splits, granting dividends, and more. When you re reviewing and planning these processes for your plan, the points outlined above need to be carefully considered, and it s important to bring in partners who have experience, proven results, global capabilities and technical adaptability. It s also important to choose partners that are focused and specialized in the plan-management industry, so that you can make your own internal decisions while leveraging specialized expertise to ensure best-in-class equity programs. Following these ten best practices will not only help ensure your equity compensation plan has the intended impact on your employees, but will also help ensure you remain compliant while implementing and administering those plans, and that you will be able to do so in the most efficient and straightforward manner possible. 5

Top Ten Best Practices ABOUT SOLIUM CAPITAL Solium is a leading global provider of web-based stock plan administration technology and services. Our software helps companies automate and manage their stock option and purchase plans, by providing unrivaled comprehensive regulatory and financial reporting capabilities. Founded in 1999, Solium has offices in Canada and the United States. Solium s mission and sole focus is to simplify stock plan administration for everyone through technology and services. Our innovative and passionate approach to simplifying and automating tasks, along with our industry-leading Shareworks software, has made us a disruptive force in the stock plan administration industry. Since our inception, we have emerged as pioneers in the industry, as we are always striving to change the status quo and challenge and update traditional methods. We take great pride in being leaders of change and delivering the most innovative stock plan administration experience possible for finance and HR professionals and plan administrators and participants. Contact Solium Toll Free: 1.877.380.7793 Email: solutions@solium.com www.solium.com 2011 Solium Capital Inc. All rights reserved. Solium Capital, the Solium Capital logo and Shareworks are trademarks of Solium Capital in Canada and/or other countries. All other trademarks are the property of their respective owners.