Trends In Equity Compensation

J.P. Morgan Workplace Solutions recently partnered with WorldatWork for a webinar to discuss the finding of our Trends In Equity Compensation: Report.

In a wide-ranging conversation Jorge Martin, Head of Workplace Solutions for North America, and Chris Dohrmann, Head of Strategic Partnerships, Workplace Solutions took a deep dive into a number of employee equity compensation-related topics, based on the findings from more than 200 companies.

Among the main takeaway messages were:

• Equity compensation a major element of C-Suite Executives’ overall benefits

Chris: “The latest figure I’ve seen for stock-based compensation as part of the C-Suite’s total compensation is 70%. And that’s up from what I had seen only a couple of years ago, which was about 60% in the US and 50% in Europe.”

• Equity is complicated, partnering with an external provider can help

Jorge: “Equity compensation is complex. It’s complex for HR people. It’s complex as an administrator of the plan, keeping up to date with all the data that goes in and out of the database – the trades, regulatory filings etc. It’s complex to communicate this to employees and it is really complex to align employees through equity compensation with overall company goals.”

• Offering equity on a global scale

Jorge: “I know that we’ve had a major influx of Japanese corporations here that are offering equity compensation to US-based employees, and the reason why that’s interesting is that, while it’s starting to change, historically it hasn’t been very common to offer equity in Japan. But what they found was that in certain industries here in the United States, if they did not offer equity, they weren’t getting American executives and American employees to come over.”

• Public companies taking a hybrid approach to equity plan administration

Jorge: “About 33% of the overall respondents outsource their plan, and 14% do a combination (hybrid of outsource and inhouse). But when you’re looking at publicly traded companies, they really want a combination of the two. They say I want to administer some pieces inhouse, and I want my partner to help me in outsourcing others. So, for example, you may want to keep a tight rein on your executive grants, whether windows are open or closed, form filings, those kinds of things. But maybe if you offer restricted stock, and you have quarterly vesting, and you stay up until 3am processing it, that’s maybe something you want to outsource. So we’re finding more and more companies are really interested in that.”

• Communicating with a multi-generational workforce

Jorge: “I have children in their twenties right now, and how they’re communicating versus the generation behind them is markedly different. So even if you’re dealing with Gen Xers like Chris and I, who like paper-based communications, it’s still something that you’re going to have to consider with a younger workforce as well.”

• Challenges of operating a global plan

Jorge: “In many instances, companies with global plans will have multiple providers, so they may have a US provider for the US plan, another one for the UK plan and so on. With that, tracking activities on a global basis can start to get complicated. If you take a look at the European Union, it seems like a monolith. They’ve got a common currency, but different regulations in each country and so you have to be mindful of that.”

Chris: “The EU usually comes out with an umbrella policy and each member state can then modify it and say this is how we’re going to do a little bit more than the policy calls for. So it’s top-down, but then you have to worry about whether or not individual countries have modified it. In the US, you won’t get a broad-based mandate from the federal level. Often, what you will get is rules in individual states, meaning you have to figure out where people are domiciled, see which one is the most restrictive and start there.”

• The changing role of equity through the company lifecycle

Jorge: “Small, early-stage companies usually offer growth shares or founder shares to specific individuals. Private backed VC (venture capital) companies will often offer equity to all employees. They’re all taking a risk and they should all benefit if that risk pays off. Private equity-backed companies typically offer management incentive plans or profit interest units to top executives. In practice, that means C-level and maybe a level below to include high potential critical employees you want to retain, but in our experience it tends not to be broad-based. And then public companies typically issue RSUs (Restricted Stock Units) and Performance awards to senior executives and also mid-level executives or mid-level managers, with some blend of ESPP (Employee Stock Purchase Plan) as well, to give everyone an opportunity to appreciate what’s happening with the company and the company stock price.”

Want to learn more? The full webinar is available now for on-demand viewing.

Worldatwork is an association dedicated to working with professionals operating in the broad compensation space.

What next?

Workplace Solutions provides businesses of all sizes with an all-in-one equity compensation management solution. We handle all the administration so you have more time to focus on your company’s journey. Get in touch today to find out how we can assist you.

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