Stock Options Administration

Content Team October 3, 2023 mins read

About the team

Global Shares’ Content Team comprises a dynamic and talented team of writers and experienced professionals who strive to deliver useful equity insights and simplify complex equity information, all with the aim of helping you to better understand equity management.

Stock Options Administration

Employee stock options are a common type of equity compensation. They provide employees the opportunity to purchase stock in their company at a pre-set price on an agreed future date. A successful stock option plan can help employers recruit, reward and retain talent, as well as build financial wealth for employees.

While many factors can contribute to a plan’s success, administration is one of the key components. In this article we’ll look at:

  • What does stock option administration involve?
  • How to administer your stock options?
  • Our administration solutions for admins
  • Our administration solutions for employees

What does stock option administration involve?

Employee stock option administration is the process of implementing, granting tracking and managing stock options in a company for employees.

When implementation commences, the administrator will set out the plan’s rules (termination rules, vesting schedule, etc). It’s then followed by a series of activities, including drafting a stock option agreement, granting, tracking grant acceptances, vesting, exercise and sales, managing employees’ purchases, communicating with stakeholders and the board of directors, updating policies/procedures, and staying compliant based on each region your employees are based in.

Not only are Legal, Finance and HR teams required to input in this process, but also multiple third-party providers – law firms for setting it up, brokers for the trading element and tax professionals to tell you what the requirements are from region to region.

Breaking administration down

Stock option administration is a complex process. Here, we break it down into eight major components for you and your team to consider:

  1. Gather all the necessary employee data:
    This encompasses all the details required of eligible employees for the option grants, such as address, branch, business unit, salary, level and title. This information will impact areas such as withholding taxes and share allocation, among others. Employees will need to notify the company of any changes to this information.
    Note: When collecting data, it’s important to be aware of the applicable data protection rules.
  2. Set up a plan type:
    Your company will need to consider what plan type and features are best suited to meet your needs (e.g. ISOs and NSOs), plan duration, (whether time or milestone-based) vesting, expiry date, termination rules, exercise methods, exercise window (if applicable), etc.
  3. Track activities: e.g. grant acceptances, vesting schedule, exercise process, sales, termination, post-termination exercise window and a lot more
  4. Coordinate sales/transfer requests: Work with brokers required to execute sales transactions or transfers submitted by employees
  5. Deal with multi-office locations:
    Options can be launched in multiple countries meaning they might be suitable for a company with a global reach. That means you will need to regularly review and monitor federal, state and foreign regulations along with securities laws for each jurisdiction you offer the plan in, from gathering data to designing a plan and administering it.
    Some companies may consider using country-specific option plans which can be more tax-favorable to their foreign employees.
  6. Handle reports, e.g. exercise, taxes, payroll, demographic and so on
  7. Communicate with employees and internal and external parties to promote the plan and share relevant information.
  8. Mobile workforce:
    Communicating with staff and the intricacies of compliance can get even more complicated when employees move across locations, e.g. the administrator will need to know the impacts on options if participants move from region to region, including the potential impacts on tax, e.g. losing the benefits of a tax-favorable ISO plan.

How to administer your employee stock options?

There are generally two main approaches to administering an employee stock option plan – Manual and Automated.

While a manual method with a spreadsheet might seem like a suitable approach when you’re starting out it can lead to complications as the plan grows and the number of participants increases.

An automated, or software solution, can often be a more scalable method and may help to mitigate the risks associated with manual processes, such as the danger of human errors or having multiple versions of the same document circulating among internal colleagues.

The differences between these two approaches:

Manual Administration Automated Administration
Lower setup cost Higher setup cost
Easily accessible Takes time to find the right provider
Lacks controls, resulting in many versions Always provides one single source of truth
Causes human error easily (no/low automation) Allows automation (e.g. automated vesting schedule)
Time-consuming Saves you time and money in the long run
Requires an extensive understanding of tax/compliance in each jurisdiction Provides extensive equity knowledge and support for each jurisdiction
Has scalability issues as you grow Scales with your company (e.g. manage multiple plans for foreign employees)
Low level of participant engagement Allows employees to access/view/exercise/trade their options
Generates reports easily
Provides a regulated trading platform
Can help you stay legally compliant in each jurisdiction
Data security

11 ways Global Shares’ stock option administration solutions could benefit you

Our administration solution combines industry-leading technology with our vast equity knowledge and extensive experience in plan administration, day-to-day transaction processing and participant management. Here are 11 benefits for a stock options administrator:

  • Smart and ever-evolving technology along with a team of experienced professionals
  • Excellent support: Include a dedicated client manager, stock plan analyst team and client service desk etc
  • Quick onboarding: Whether you’re starting or switching, we set up your plan seamlessly and efficiently. On average, our onboarding process is completed in eight weeks or less.
  • Ease of administration: Using an automated system allows for intuitive and simple administration without a steep learning curve.
  • Automation of key administrative tasks: Your employee stock options are readily excisable once the vest date arrives, meaning you won’t need to manually track the vesting schedules.
  • Stock options for employees globally: We can help you design and operate a plan for participants in numerous countries, using one seamless system.
  • Customized reporting: Generate financial and business intelligence reports, tables, charts, data maps etc, all at the click of a button
  • Interface customization: Incorporate your own company’s logos, tailored-to-match fonts, colors, layout, and aesthetics to meet your corporate requirements.
  • Enhanced security: Supported by a team of in-house cyber security and IT professionals.
  • Always being improved functions & features: Our IT team are constantly on the look-out to make improvements to our offering based on user feedback and technological developments.
  • Software integration: Connect and extend your equity management workflows with a range of integrations.

Additionally, our solution helps empower your employees with a fully personalized, online participant portal. This engaging, secure, easy-to-navigate portal allows them to view, track and trade their option shares themselves – further reducing your admin workload. Read on.

Our solutions could benefit your employees too

Giving employees 24/7, online access to their stock options can be critical to helping them to understand how their plan works and benefits them. Here are 8 benefits for employees:

  • Engaging & intuitive participant portal: 24/7 real-time online access to allow employees to accept, track, exercise, sell and transfer their option grants.
  • Equity life cycle at a glance: Allows employees to see where the value of their share options along with details of – how many shares are vested, remain to be vested, have exercised etc.
  • Mobile app: Gives your on-the-go participants the ability to access and trade their equity anytime, from anywhere, at the touch of a button.
  • Easy, secure trading: Employees receive funds into their bank accounts automatically when their trades are settled.
  • Multi-lingual & multi-currency interface: Optimizes your employees’ experience.
  • Participant help desk: 24/5 support available to help reduce your stock plan administrative workload.
  • Self-learning library: Videos, FAQs, Tax guides, Calculators for modeling purchases and more. Their statements, contract notes and related documents can also be found in their personalized portal.
  • Fully branded portal: Consistent with your company’s brand, language, ethos and corporate identity.

Contact Global Shares

At Global Shares, we have over 16 years of experience helping companies of all sizes harness the potential of equity to attract, retain and reward key talent. From software implementation and administration to compliance and reporting – we can help your company and employees to reap the benefits of employee equity compensation plan.

We would be delighted to discuss or demo our Stock Options Software with you in more detail.

Request a Demo

Please Note: This publication contains general information only and Global Shares is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. The Global Shares Academy is not a substitute for professional advice and should not be used as such. Global Shares does not assume any liability for reliance on the information provided herein.

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