A global share plan is an equity compensation plan that is rolled out by an organisation to their employees around the world. Companies must consider how many countries the plan will be rolled out to and the number of eligible employees in those countries, as well as the legal and tax implications. Equatex’s Patrick Stierli discusses what’s involved.
In my opinion the first factor that organisations should consider when rolling out a global share plan is the strategic objectives of the plan: what does the organisation want to achieve? Is it building a share ownership culture or increasing the number of shareholders? Rolling out a global share plan is a long-term investment, so the objectives need to be clear from the outset.
Organisations need to ensure the plan design is attractive to employees and part of this process is establishing whether they want to roll out a plan with shares being offered to employees at a discount. Alternatively, they could work with what we call a matching award, where for every two or three shares bought, employees receive another for free. Within this, it is a good idea for the plan design to also include the minimum or maximum investment amounts per employee per year. Say a company headquartered in the UK decides to roll out their plan in 50 countries with around 35 different currencies. The minimum and maximum amounts need to be defined in these currencies, which makes it more complex.
The impact of purchasing power
Organisations should then compare the earnings of employees in different countries against the share price. If one share is worth £80, what does this mean for employees located in countries with a lower purchasing power? How much can employees realistically invest and is this sufficient to buy at least one share? Also consider that the investment has to be converted from the local currency into the market currency of the shares, or if that is not possible, a third currency must be used. All these costs must be agreed up front.
Communication is greatly linked to the success of the plan. The rollout requires very early engagement with local units as they need to be involved in communicating and administering the plan. Overall, there must be commitment top down from local management to make the plan a success. A lot of communication is needed to share the benefits for individuals, so it’s a good idea to prepare rollout packs in several languages. The language of the plan’s administration system may also need to be adapted; Equatex recently helped administer a plan where part of the rollout was in Russia, so we supported the company by offering Russian language in our web platform EquatePlus.
The rollout requires very early engagement with local units as they need to be involved in communicating and administering the plan
Consider edge cases
In terms of vesting, most communication is now paperless, which is fast and efficient, but if you are rolling out the plan to employees who do not have internet access, for example, can you easily communicate online? If paper is involved, the timings are completely different, which presents new challenges. Another challenge is how employees pay for their shares. A simple and easy way for employees to participate is through salary deductions but there are some countries where this is not allowed.
Seek experienced help
A trusted administrator not only helps put the technology in place for a global share plan; it can also help organisations with these aforementioned local and specific challenges. We have a wealth of experience at Equatex in rolling out global share plans in multiple countries; I would recommend selecting and bringing your provider on board as early as possible. If we are engaged when an organisation is at the design stage, we can bring our experience to the discussions around the administration, challenges in general and best practice for processing of the plan. We can advise on whether or not it can be easily administered, which prevents challenges later in the plan’s lifecycle.