| Having turned the calendar to a new year and a new | | | | understand how and when those awards will directly |
| decade, it is timely to look at some of the major issues | | | | benefit them and as important, how they need to |
| negatively impacting stock plan administration and | | | | perform to achieve the desired outcome. |
| more importantly, how they can be avoided. Certainly, | | | | 6. Failing to survey the program's constituents. |
| your professional success as well as the perceived | | | | Continuing the “customer” concept from above, |
| success of your company's plans will be at least | | | | how do you know whether your plan is operating well |
| partially judged on how effectively you execute with | | | | without surveying your plan participants and other |
| respect to the ten areas below. So, in no particular | | | | organizational areas which are impacted by your plan? |
| order, the following are some key considerations to | | | | Are there some existing deficiencies which can be |
| enhance the overall effectiveness of your employee | | | | improved on? You won't know unless you ask. Use a |
| incentive plan. | | | | simple-to-complete and easily understood survey |
| 1. No single person responsible for overall plan | | | | (on-line if possible) to boost your response rate. Also, |
| administration. While the plan itself typically designates | | | | attempt to standardize surveys over time so that you |
| the Board or the Compensation Committee as the | | | | can do trend analysis to hopefully establish new |
| overseer of the plan, the responsibility for effective | | | | performance standards and document improvements |
| and efficient day-to-day operation of the plan falls to | | | | to the program. |
| equity compensation “experts” within the | | | | 7. Assuming that one size fits all wherever your |
| organization. Within this group of experts, it is essential | | | | company has operations. In an era of globalization, |
| to a program's success to have a first among equals, | | | | plans operating across multiple countries provide the |
| analogous to the conductor of an orchestra, for | | | | stock plan administrator added challenges. The |
| monitoring the program's overall operation. Extending | | | | securities registration and filing, tax, accounting and |
| this analogy, the conductor must understand the | | | | privacy requirements may differ dramatically across |
| deliverables and accountabilities of all areas that touch | | | | many of the countries where your company's plans |
| the plan. Failing to coordinate across all these areas is | | | | operate. And if the above was not enough, ignoring |
| asking for a discordant performance. | | | | international employee mobility tracking and related tax |
| It should be clear to executive management and to | | | | withholding requirements can come back to bite you. |
| everyone else involved with the program who your | | | | 8. Garbage in-garbage out. Although this is presumably |
| plan's conductor is. This is the person to whom the | | | | obvious, don't neglect the data integrity of your plan. |
| CEO or the Board Chairman will turn when there are | | | | Unless you are auditing all transactions and monitoring |
| questions or issues. This person should have the status | | | | plan shares granted against shares approved and plan |
| and title to effectively carry out this role. | | | | shares issued against total shares outstanding on a |
| 2. Not creating procedures for all major activities. Now | | | | regular basis, it is easy for your plan data to get |
| that we've established the importance of the equity | | | | seriously out of balance. This is not something for |
| compensation program “coordinator”, an | | | | which you want to depend on your auditors; data |
| essential role of that person is to ensure that | | | | deficiencies suggest control issues and will raise a red |
| procedures are created for all key transactional, filing | | | | flag for the audit overall. An ounce of prevention is |
| and reporting activities. Nothing ruins a plan | | | | worth a pound of cure. |
| administrator's day quite like a failure to complete a | | | | 9. Not keeping current with changing requirements. |
| requested stock option exercise or missing the | | | | Equity compensation practitioners are aware of how |
| deadline for an SEC Form 4 filing. | | | | frequently securities, tax and accounting standards can |
| 3. Failure to measure the total expense of your equity | | | | change. Remaining abreast of these changes, while |
| compensation plans. Certainly, great emphasis is | | | | undoubtedly challenging, is essential to having a |
| placed on the accounting expense and shareholder | | | | compliant plan. Also, don't forget to verify that your |
| dilutive impact of your equity compensation program | | | | equity plans software remains current. Knowing about |
| and rightly so. However, the total cost of your program | | | | the changes is only half the battle; ensuring that your |
| includes all the administrative expenses and cost of | | | | software allows your company to conform to new |
| errors relating to the program (see #2 above). To | | | | requirements is the other half. |
| measure the cost effectiveness of your plan, you | | | | 10. Not knowing when to go outside for help. While we |
| need to understand where and what all these costs | | | | would all like to be completely self-sufficient in |
| are and then take steps to improve the plan's cost | | | | managing our companies' equity programs, the reality is |
| effectiveness. | | | | that the coordinator role is both complex and dynamic. |
| 4. Failure to specify key performance measures for | | | | Any one individual cannot necessarily be expected to |
| success of your equity program. This is the | | | | have a mastery of all the securities, accounting, tax, |
| “benefit” side of the cost-benefit analysis to the | | | | payroll and international plan requirements associated |
| cost side above. Internally, and with the agreement of | | | | with a plan's operation. Know when to ask for help, |
| management, determine the success factors for your | | | | and determine where there is expertise for a particular |
| plans. These factors should be quantitative and | | | | area. |
| measurable so that you can regularly track results | | | | Being mindful of pitfalls and taking the necessary steps |
| against those standards. Don't be afraid to raise the | | | | to avoid those listed above should go a long way to |
| bar over time. | | | | ensuring your and your company's plans' long term |
| 5. Deficient participant communications. Don't overlook | | | | success. |
| the importance of communicating with your plan | | | | We sincerely wish you success and prosperity in 2010! |
| participants (think of them as “your customers”) | | | | Keep in mind that if your list of New Year's resolutions |
| clearly, regularly and concisely. As experts in the field, | | | | includes some of the great tips & suggestions provided |
| plan administrators may assume a knowledge and | | | | above, you're in good company. Solium Equity |
| appreciation of the plan among the participants which, | | | | Consulting has the depth of knowledge, expertise and |
| absent a good communications program, is typically | | | | experience to assist! Contact us today at |
| not be the case. Even though plan beneficiaries often | | | | 248.348.7104 or email us for more information about |
| are higher level managers in the organization, they may | | | | our services and offerings. |
| undervalue their awards if they don't both fully | | | | |