Minimizing the Administrative Nightmare of Global Equity Plans

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Minimizing the Administrative Nightmare of Global
Equity Plans

• Karen Needham ETRADE Financial Business
  Solutions GroupJoty Paparello AOL Time Warner

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• Summary
• This session will outline and explain the steps
  that should be taken when implementing an
  employee stock option plan (US based) or an
  employee stock purchase plan (ESPP) to a non-US
  site. This is an interactive workshop where
  questions from the attendees are encouraged. A
  dialogue will be provided that encourages
  questions and provide answers to many of the
  problems facing stock plan administrators in the
  global market. The issues covered in the session
  include how management should be engaged what
  legal, accounting, and tax issues are
  encountered how do you handle funds
  disbursement and how to handle employee
  education and notification of plans.
• BiographiesKaren Needham ETRADE Financial
  Business Solutions Group
• Karen is a Certified Equity Professional (CEP)
  and has over 25 years of expertise in Employee
  Stock Option and Stock Purchase Plan
  administration. Karen is a senior member of the
  Industry Education and Product Training
  department with ETRADE Business Solutions Group.
  In this position she coordinates and presents
  the product training for all Equity Edge modules
  for clients, as well as the Industry Education
  seminars that are offered to all. Karen
  interfaces with all departments within ETRADE
  providing advice and assistance in all areas of
  equity compensation planning and design. Her
  vast experience as the administrator for
  multi-national plans is of value both to the
  company and our clients.
• Prior to joining ETRADE Financial, Karen served
  as senior staff member for Shareholder Relations
  at one of the top 5 global biotechnology
  companies. Karen began her career in equity
  compensation at Wang Laboratories, Inc., a New
  England-based computer manufacturer, where she
  administered both the stock option and stock
  purchase plans on a worldwide basis for over
  40,000 employees. She was a founding member of
  the Equity Edge Client Advisory Board, and is a
  frequent speaker at Equity Edge User Group
  meetings, and NASPP regional meetings and is a
  presenter at the Global Equity Organization 2002
  conference.
• Karen is a member of NASPP, the Global Equity
  Organization (GEO), and the National Center for
  Employee Ownership (NCEO) and serves on two
  sub-committees for the Certified Equity
  Professional Institute of Santa Clara University.
• Joty Paparello AOL Time Warner
• Joty is the Manager of International Stock Plan
  Administration for AOL Time Warner.  Joty joined
  AOL in May, 1999 as a Stock Analyst.  Since the
  merger with Time Warner, they have taken on the
  administration for all of AOL Time Warner, which
  is approximately 90,000 optionees in 51 different
  countries.  She is a member of the Share Data
  Advisory Board, Global Equity Organization, and
  NASPP.
• Contact Info  Email Address Paparelloj_at_aol.comP
  hone  703-265-1403Fax [phone]Address
   22110 Pacific Boulevard, Dulles, VA  20166

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Latin South America
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Administration Concerns

• Securities Law
• Company Law
• Employment Law
• Exchange Controls
• Day-to-Day Administration

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Securities Law

• Usually requires some form of registration and/or
  reporting
• Are there securities law restrictions?
• If so, what are they?

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Company Law

• Are there restrictions on assisting employees in
  purchasing shares in employer or foreign parent
  company?
• Are there special reporting requirements for
  company executives?
• Is recharge in the best interest of the local
  entity?

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Employment Law

• Taxation of Employee?
• Income tax withholding reporting required?
• Social insurance?

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Taxation

• How do you determine withholding rates?
• What method should be used for collection?
• withhold at a flat rate,
• send total proceeds to foreign payroll for
  withholding,
• require foreign payroll to collect from
  employee,
• proration over future payroll periods, etc
• How do you collect taxes on ESPP?

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What to ask, When to ask Prior to Granting
Options

• Can we grant options?
• Ask before granting!!
• What are the restrictions?
• Are the restrictions on vesting? Pricing?
  Exercise? Holding requirements?
• Are payroll deductions allowed?
• Can we take contributions for ESPP plans?
• Are there restrictions on the percentages?
• Currency Conversion (especially for ESPP)
• when will it occur?
• each payroll period
• or at purchase date

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ASK Early! Before the Options are Granted

• Taxation Employer/Employee
• Income tax withholding reporting
• Employee? Employer?
• Will the employee be subject to additional taxes?
• Grant ? Exercise? Sale?
• Social Insurance - what are the limits?
• Can you require employees to pay the company
  portion?
• Employee? Employer?

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ASK Early! Before the Options are Granted

• Securities Law
• Are there limits on shares that can be issued?
  By company? By employee? Aggregation (with other
  options or ESPP)?
• Can employees hold foreign securities?
• Exchange Controls
• Can funds be sent into U.S.? Can employees
  receive funds from U.S.?
• Are there limitations on funds entering/leaving
  country?

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Entitlement (Acquired Rights)

• Many South American countries have strict rules
  and regulations surrounding Entitlements.
• This is the right to continue receiving options
  and awards on a regular basis.
• This could include calculation of earnings upon
  retirement and/or termination!
• CHECK WITH YOUR LEGAL COUNCIL TO AVOID MISTAKES.
• Many problems can be avoided with proper language
  in the employment contracts.

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Data Privacy

• It is strongly recommended that the company
  obtain written consent from the employees for the
  collection, use, and transfer of data abroad
  before implementing the plan

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Exchange Controls

• Mexico and Brazil have very strict laws and
  controls governing currency movement
• Argentina, due to recent events, has tightened
  exchange controls
• Please check with your legal and accounting
  advisors to ensure that you are complying with
  the latest rules and regulations

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Last But Not Least

• Documents should be translated into local
  languages!!!
• Some countries require it!
• All Countries want it!
• Employees need it!
• Translations should be done by a licensed,
  certified agency in the country where the
  translation is used.
• !

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