When Educating Global Participants about Equity-Based Compensation, One Size Does Not Fit All

August 3, 2020 Aunalisa Arellano

Here’s the scene: A private company in the U.S. had recently set up an equity-based compensation plan for their global employees. After creating a booklet explaining the equity compensation program, they had it translated into different languages for each jurisdiction where they operated. The only problem? Their Spanish language translator wasn’t familiar with the ins and outs of stock-based compensation and thought the word “vest” referred to a piece of clothing.

Although this issue was easily rectified, it does point to an underlying challenge many private companies may face when trying to share details about their equity compensation with global participants. Simply put, one size does not fit all. And that’s not just true from a language perspective. Your plan participants around the globe have different cultures, use different currencies, are subject to different tax rules and possess different levels of understanding about equity-based compensation. That speaks to the importance of customizing your communications to their needs.

Ultimately, your equity-based compensation plan is an expense to your business – one that’s only justified if it helps you attract and retain in-demand global talent. If your global participants don’t understand how the program works and the types of equity compensation you’re offering, you’re at risk of losing that benefit. On the flip side, if they’re truly engaged, you gain the opportunity to create a genuine culture of ownership. Here are some tips companies can use to help structure their communication around equity compensation plans with their global participants.

Make it relevant

An effective global communication plan should do more than explain the difference between various types of equity compensation, such as stock options or restricted stock units (RSUs). It provides your global employees with information about how to participate in the program, how their options will vest, how an appreciation in value might affect them financially and what taxes they may be expected to pay.

In sharing information, make sure you tailor your information to the appropriate jurisdiction, particularly if your awards are denominated in a currency that isn’t local to your employees. In fact, there may be special considerations or even downsides to share-based compensation in some jurisdictions, which is why it’s critical to understand the differential tax impacts of offering equity to your global employee base.

If you operate in multiple countries, Shareworks Global Intelligence gives you access to an easy-to-use online database of legal and international tax information regarding global equity spanning more than 170 countries. You can even create customized and branded employee tax guides that are automatically updated several times a year to reflect changing tax rules. It is also important to consult your own advisors for legal and tax advice.

Use multiple channels

Ideally, your equity plan education will start as soon as you hire a new employee and will include an interactive element, so you can validate that your new hires understand or acknowledge the information you’ve shared. If geographic constraints prevent you from meeting face-to-face, aim to set up a videoconference to walk your new staff through the process. In doing so, be respectful of time zone differences and try to provide at least some education in the language of their choice.

Keep in mind that not all forms of communication resonate across cultures or employee cohorts. To make sure your messages hit the mark, it’s important to use multiple media channels – from phone calls, fireside chats and online meetings to emails, blog posts, videos and flyers.

If you’d like some help with this, the Shareworks participant experience includes a built-in communication toolkit that enables you to send out customized announcements and notifications, both through the system and the mobile app. You can also store your educational resources – such as plan updates, messages from management, FAQs and 409A valuations – directly on the platform, giving participants easy access to the information they need to stay up-to-date.

Create a feedback loop

When it comes to education, experience shows that one-time exposure to new information is often never enough. To engage your global participants in your equity-based compensation plan, you shouldn’t just give them an information package when they’re hired and never follow up. Instead, you should adopt an ongoing communication program.

The frequency with which you communicate will depend on your company culture, but typically you should aim to send regular reminders about the program and offer refresher courses several times a year – perhaps when you issue new grants or conduct an employee performance review. Use these opportunities to check on your employees’ understanding, update them about any changes in the value of their options and clear up any lingering confusion. This is especially critical in jurisdictions where your employees may not be culturally accustomed to asking questions.

The more interactive you make your communications, the more engagement you’re likely to get. One company, for instance, sends a postcard to all staff in advance of their annual grant offering a prize to the first 25 people who acknowledge receipt of the postcard. Beyond creating buzz, this has helped them increase plan participation.

Big payoff for little effort

While you may be inclined not to customize your equity plan communications if you have a relatively small global base of employees, the payoff usually more than outweighs the effort. Targeted communications show your participants that you understand their unique issues and concerns. That attention to detail is what generates real long-term loyalty – the kind necessary to fuel your business growth.

We would love to chat with you more about solutions Shareworks can offer from tools to help develop an effective communication plan for your global participants to equity plan administration, please reach out.

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