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Sunday, June 15, 2014

Managing Your Stock Plans Internationally


When devising a global equity plan, U.S. multinational companies should employ a combination of administrative, financial, and legal resources to assist in building a framework that meets international standards. Factors that must be addressed in the design process include determining the countries where awards will be granted and the types of awards to be issued. In cases where filing and compliance regulations are stringent, granting alternative equity types can lower the cost of compliance. 

For example, granting Restricted Stock Units (RSUs) instead of stock options can eliminate securities and exchange control costs in certain jurisdictions. Cash bonuses are another viable option when actual implementation proves to be difficult. 

Tax treatment of awards and withholdings are another critical area that must be reviewed prior to offering equity outside of the U.S. Companies should identify whether there are any favorable tax-qualified programs and if international employees would experience any negative tax treatment in their country of residence. In addition, withholdings should be allocated accordingly so that there are enough shares to cover taxes, and yet not so much as to shrink the employee’s monthly salary. 

Other factors conducive to launching a successful equity program abroad to consider are:

  • Social insurance costs of an award
  • Exchange control or restrictions over currency flow
  • Privacy laws and the measures available for protecting employees data
  • Payroll deduction prohibitions
  • Tailoring documentations for satisfying local jurisdictions or country-specific requirements
  • Maintaining a monitoring system that can accommodate when legal conditions change or new terms arise 

In summary, companies are cautioned against applying U.S. practices to international awards and communication. Global stock plans can be a powerful tool for companies to provide incentives to their employees across borders, but must be handled cautiously. 

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