From Record Keeper to Strategist – Emerging Trends in the Profession of Stock Plan Administration

December 22, 2014 Shareworks Marketing


How pressure and time have forged a bright new future
in stock plan strategy

Even to the most casual observer, it would seem that stock plan administration (SPA) is a profession that has grown up overnight. A high degree of pressure and regulatory scrutiny forced that frenetic evolution. Last year, Solium took a look back at the equity compensation movement and the way it spawned a unique new role with a high degree of visibility and responsibility. But responsibility is one thing, and strategy is another.
Now, Solium speaks one-on-one with NASPP Executive Director Barbara Baksa, as she elaborates on their recent survey and describes the factors that are freeing SPAs from administration and opening the door toward a bright future in stock plan strategy.

Trend 1 – Integrating with total compensation

Since it came into being, SPA has been a hybrid role that requires literacy in HR, legal, accounting, payroll and tax. Given these disparate underpinnings, SPA doesn’t always have a clear place to call home, a fact that came through in the 2011 Domestic Stock Plan Administration Survey, a research project cosponsored by the NASPP and Deloitte.

The study showed that the majority of respondents locate equity compensation administration in HR (60% of stock plans and 57% of ESPPs). That proportion has remained relatively steady since the NASPP’s 2004 survey. According to Baksa, it’s significant to the industry that SPA is chiefl y and consistently located in this department. “It’s where the function reports into and where its decision makers reside,” she says.

While it sits within HR, SPA remains largely bracketed off from some of HR’s concerns. “Right now, stock compensation oftentimes sits in its own little box and isn’t considered as part of the overall compensation package. It’s thought of as an add-on,” she says. “Companies aren’t coordinating it as a piece of total compensation.”

Baksa highlights integration with HR’s greater objectives as an area where SPA is poised to offer greater value – to help ensure that equity compensation keys into the company’s overall retention, recruitment and incentive strategies as well as its overall compensation goals. “I see companies getting a lot smarter about that,” says Baksa. “I see everyone, including SPA, getting in the same room and developing an overall compensation strategy that will include cash, stock, bonuses – the whole gamut.”

Primary responsibility in administration    
Department Stock plans ESPP
Human resources/compensation and benefits 60% 57%
Legal 10% 9%
Accounting 9% 8%
Payroll 7% 4%
Finance 5% 11%
Tax 4% 0%
Corporate secretary 1% 3%
Treasury 0% 7%
Other 2% 3%


Trend 2 – Moving toward outsourcing

If one clear story emerged from the survey, it was the trend toward increasing partnerships with third-party administrators. “The number of companies that outsource more than 75% of their plan went from 33% in 2007 to 41% in 2011. It seems that those companies that are outsourcing significantly are moving further down that path,” says Baksa. “I’m sure that part of this decision are the risk mitigation and improved controls that can come with outsourcing.”

Baksa also noted there was a decrease in the number of staff allocated to SPA. In 2007, 31% of respondents reported that they had zero personnel dedicated to stock plan administration. This year, that fi gure rose to 39%.

“I was shocked by that,” says Baksa. “Given the shareholder scrutiny on these plans, the issues with internal controls, the backdating scandal, ASC 718 and 409A, the last thing I would have expected is companies saying, ‘We don’t need as many people administering the plan.’ But in fact, that’s what we saw.” And while the data doesn’t conclusively draw a clear relationship between an increase in outsourcing and a decrease in staff, Baksa comments it seems to be a reasonable explanation.

Ultimately, Baksa feels the trend toward outsourcing is a positive for the profession, given that the most error-prone and administrative tasks are delegated to experts with tight controls. That way, she says, “SPA has more time to focus on strategic tasks rather than day-to-day administration.”

Percent of stock plan administration outsourced Percentage of companies’ plans
Less than 25% 16%
25%–49% 17%
50%–75% 26%
More than 75% 41%


“The number of companies that outsource more than 75%
of their plan went from 33% in 2007 to 41% in 2011.”
– Barbara Baksa – Executive Director, NASPP


Trend 3 – Communicating strategically

In this day and age, a trend toward electronic formats can hardly surprise anyone. But in some regards, SPA has been slow to embrace the digital age. The survey revealed that more and more companies are using online grant agreements as well as online signatures. Baksa sees more of that to come, and that eventually, everything from 6039 returns to year-end tax statements will be distributed electronically.

“Ultimately, that’s a good thing. As we move to electronic formats, SPA is freed up to focus on more strategic employee communications,” says Baksa, adding that plan design and accounting tend to get a lot of well deserved attention, unlike employee education.

“Companies spend a lot of money designing the plan, fi guring out how it should work, and determining the expense they have to recognize, and then the education component winds up being an afterthought. Yet it’s probably the most important thing you can do with your plan – making sure employees understand it.”

“Instead of spending time printing out tax statements and distributing them to employees,  administrators can be thinking about overall communications being provided to employees on their taxes and how they can improve that part of the program,” explains Baksa. “They can look at questions like, ‘Can we do a better webcast? Can we provide an FAQ? Can we provide better instruction? How do I fi nd ways to reduce the number of phone calls I’m getting?’”

When asked if she sees SPA collaborating more with their corporate communications departments, Baksa is hesitant. “In the end, this is pretty complicated stuff that is communicated to employees. The content is so highly specialized, that even if we start seeing more collaboration between those two departments, SPA will always have a lead role.”

Individual grant notices and agreements are distributed to employees by:
  Paper Email Company intranet Third-party Website
Grant notice 44% 41% 5% 38%
Grant agreement 33% 17% 9% 63%


Types of signatures required on grant agreements
Do not permit digital/electronic signature Permit digital/ electronic signature for all employees Require digital/electronic signature Permit digital/electronic signature for some employees
30% 39% 22% 8%


Trend 4 – Improving internal controls

Internal controls represent another aspect of equity compensation administration where SPA will likely begin to deliver more value. “The backdating scandal highlighted a dearth of controls. We’ve come a long way since then, but we still have work to do,” says Baksa.

Baksa acknowledges that, like employee education, internal controls are treated as a secondary concern – an afterthought. But Baksa sees SPA catching up to that area of plan management and that it will become an area of growth for the profession.

“The company’s internal audit group could certainly help with that process,” she suggests. “It can be dangerous to have one person develop all the internal controls. The third-party administrator could also be a resource for internal control development. As Baksa says, “They see so many types of plans and are able to lend that experience. They’re the experts.”

“The backdating scandal highlighted a dearth of controls.
We’ve come a long way since then, but we still have work to do.”
– Barbara Baksa – Executive Director, NASPP

Final thoughts

“The stock plan administration role has evolved from being a largely secretarial role, say 20 or 30 years ago, to a role that some companies value very highly, one that has a lot of responsibility within the company,” comments Baksa. And that evolution is sure to continue. The chief drivers of that transformation, technology and outsourcing partnerships, will enable SPA to become a profession that has more to do with achieving a vision than with performing routine tasks.

As SPA begins to explore areas like compensation strategy, employee education and internal controls, constant learning through programs offered by the NASPP and CEPI will remain invaluable. And with so much opportunity on the horizon, it’s easy to see how administrators will be well poised to direct their careers in directions that interest them. Not too many professions can lay claim to that.


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