Presentation Transcript

1. Affordable Global Equity Compliance: How to Manage Your Company’s Risk on a Tight Budget

2. Today’s Panelists Mike Pewton (UK) GlobalSharePlans Peter Vassallo (UK) BP plc Kelly Geerts (US) Apple, Inc. Jewon Wee (US) ISP Advisors, LLC
3. Agenda Global equity compliance risks, tasks, costs Plan sponsor case studies: Apple & BP Tips as to how to do this going forward
4. Other Risks Criminal sanctions on company and/or employees Disgruntled employees Reputational risks Business interests

   What are the risks?

   Monetary Risks Fines for failure to comply Late tax payment penalties & interest Legal expenses defending criminal sanctions Business interests
5. Compliance costs Internal Costs Maintaining a knowledgeable, internal team (may make sense to hire an experienced professional to lead) Develop & maintain global payroll procedures Develop & maintain other informational and transactional procedures External Costs Educational conferences and training costs Professional fees to obtain general regulatory & tax advice Professional fees to handle local country filings Professional fees to handle local country tax services Translation and delivery of participant education materials
6. Compliance Tasks & Costs
7. Regulatory compliance Compliance can seem more difficult/diverse: Securities laws compliance Exchange control compliance Data Privacy Employment law issues Compliance may seem less “risky” Penalties may not seem as real but: Large fines Potential criminal sanctions Reputational risk
8. Regulatory compliance – Are there alternatives?
9. Regulatory compliance – How do we do it? Know the issues: Securities filing triggers for each equity type (options, RSAs, RSUs, etc.) Exchange control issues for equity types (and regions) Build in compliance: Data Privacy Exclusion clauses Flexibility in rules Changes to take into account foreign legislation
10. Tax compliance Compliance can seem more straightforward Tax information is clearer Issues are more tangible Information more readily available More local/administrator assistance Risks more tangible: Non compliance is more “obvious Fines are “obvious” But what about mobiles? Tax compliance is absolute but don’t forget regulatory
11. Tax compliance - Are there alternatives?
12. Tax compliance – How do we do it? Know the rules: Taxable events (grant, vesting, exercise, etc.) for each equity type (options, RSAs, RSUs, etc.) Payroll withholding & reporting obligations Tax withholding rates (income & social) Know the dates: Withholding & remittance due dates Reporting (year-round and at year-end) Know your employees Local nationals vs. mobile employees
13. Global Equity Compliance Knowledge Development Develop and maintain sufficient “internal” knowledge of the key compliance tasks A global “lead” to facilitate knowledge transfer, monitor & coordinate compliance activities Supported by a cross-functional/country team Global lead/team should be aware of & drive compliance activities Regional and local country filing requirements Exchange control permits (employee’s responsibility) Payroll wage reporting, withholding & tax remittance Employees personal tax obligations
14. Global Equity Compliance Knowledge Development (continued) Internal lead/team should also be assist in structuring plans carefully to ensure correct international clauses for Data Protection compliance Exclusion clauses. Translating (only) where required You cant know everything everywhere all the time…but should have a framework to: Stay informed of regulatory changes that affect your company programs Efficiently perform impact analyses Determine practical next steps, including seeking professional help when warranted.
15. Compliance tools & resources for “Do-It-Yourself” research
16. Compliance tools & resources for “Do-It-Yourself” research
17. Case Studies: Apple & BP Apple, Inc. 43,000 employees in 34 countries Over 33,000 outstanding grants and 19,000 ESPP participants Top 3 global equity compliance priorities Accurate local tax withholding and reporting Timely statutory reporting where required Employee education BP, plc 92,000 employees in more than 80 countries Global share purchase plan with matching element, RSUs, (some) options locals and expats Top 3 global equity compliance priorities Regulatory compliance Tax compliance Mobile tracking
18. Approach to Global Equity Compliance Apple Regular meetings with cross-functional team including Compensation, Legal, Tax, Finance and Stock Plan Ops Changes in legislation Expansion into new countries Changes in Comp policy Established relationship with global law firm Twice a year updates on country rules Partial automation of mobile compliance BP Regular compliance cycle Know when & how often you are going this and do it consistently Consistent contacts locally BP Local Known law firms Use country-by-country knowledge database to keep updated all year Specifically addressing mobile compliance
19. Approach to buying external advice and compliance services Apple Employ strong internal team members with global experience Engaged Finance and Tax teams place importance on audits and compliance Daily audits Monthly reconciliations Quarterly reviews Outside law firm has broad distribution globally BP Internal global equity expertise Database Annual trawls Experience (centrally and locally) Consistent annual procedures Regular filings P of A where required Specific Cash countries
20. How have you reduced overall cost to Global Equity Compliance? Apple Developed audit tool for Stock Plan Ops team to use on a daily basis to identify exceptions Used country-specific details from outside law firm to build spreadsheet for mobility calculations Monthly meeting of core partners ensures no risk is overlooked BP Perform feasibility internally using subscription-based knowledge database Confirm issues with local lawyers directly Consider country-specific alternatives wherever possible to eliminate costly plan features
21. What plan design & operational alternatives have you considered to lower local country compliance costs? BP Share delivery Treasury shares Newly issued shares Share delivery Share plans Cash alternatives Share Delivery Direct ownership Holding accounts Power of Attorneys Apple Discontinuation of plans in specific countries with expensive filing requirements Cash-based plans vs. shares Forced sale requirements
22. Tips Internalize global equity compliance knowledge – Be mindful that the appropriate level of internalized expertise will vary based on your company’s needs Establish a practical framework for global equity compliance that makes sense for your company and apply it “year-round” (not just once a year!) Learn to do some or all of initial “due diligence” internally using free and inexpensive country-specific knowledge resources. Learn how to recognize situations that warrant consulting with external advisors (get external advisor sign off in the “difficult” countries) Structure your plans to avoid expensive filings
23. Tips (continued) Maintain a global calendar of all key deadlines for filing, reporting, tax remittance and check with local country contacts periodically to make sure the deadlines are being met. Consider the per-participant compliance cost (set a per-participant budget and stick to it!). Utilize web-based solutions for educating employees of their personal responsibilities to comply.
24. Thank you! Kelly Geerts, geerts.k@apple.com Mike Pewton, mpewton@globalshareplans.com Peter Vassallo, peter.vassallo@uk.bp.com Jewon Wee, jewon.wee@ispadvisors.com