Computershare Plan Managers held its annual client conference in New York City from July 19 to 20. Speakers came from Deloitte, AON, E&Y and HighTower to share their insights on a wide range of topics. We even had Dr. Joseph Blasi from Rutgers University give us a history lesson on broad-based equity compensation in the U.S. Here's what I learned.Broad-based equity compensation started in the U.S. on cod fishing boats.
Dr. Blasi from Rutgers University told us this story. In the early days of the United States, dried cod was one of the largest exports. Numerous fishing boats trolled along the New England coastline. And a common practice at the time was to offer the sailors on the boat shares in the profit from the haul as payment, an early form of broad-based equity compensation. This was the first in a series of fascinating stories Dr. Blasi told us about the history of broad-based equity compensation in the U.S.Complexities in withholding on equity awards still remain after changes to ASC 718 standards.
Back in March 2016, the Financial Accounting Standards Board (FASB) changed the rules around withholding on stock option exercises or restricted stock vestings to allow companies to withhold the maximum statutory payroll rates rather than the minimum rate. This was welcome news but there are still complexities to consider. In her presentation on current trends in equity awards, Mirjam Krawiec from E&Y warned us all to review our plan documentation. Many plans require minimum withholding. She also warned us to review the rules in different countries. Some do not allow withholding in excess of the required amount. Others consider the initial withholding the final amount and do not allow an adjustment to withholding on the tax return. Bottom line, withholding on equity awards continues to be complex.When it comes to ESPPs, small cap companies tend to be more generous.
Jack McArthur from AON went over the results of a recent review of plan design and participation rates for 240 of Computershare's ESPP clients. Of the many findings, one interesting result was that small cap companies tend to have more generous plans. They tend to prefer the 15% discount and offer a lookback on their plans. Speculation in the room is that these smaller companies rely on more generous benefits like this to attract and hold top talent.Financial stress is a major problem in the U.S.
Kurt Grunsfeld from HighTower Advisors delivered a sobering report that Americans suffer from high levels of financial stress. High consumer debt, healthcare costs and low savings rates all contribute to this stress. And it definitely has an impact on employee performance, with lower productivity, higher absenteeism, more health problems, and higher turnover. But before we all curl up in a ball in the corner, there is a solution! The key, as Kurt and his panel pointed out, is to provide plenty of education to your employees on how to make use of the company's financial benefits to improve their financial wellness. Some topics to cover include budgeting, managing debt, healthcare cost planning, insurance needs, college savings and retirement planning.Even business travelers have to worry about mobility and taxation.
Mark Miller and Paul Gladman at Deloitte reminded us that these days, even business travelers are considered eligible for taxation in the locales where they travel. Sometimes as little as one day of work can be enough to incur a tax from that locale. The key is to develop a consistent policy to track such business travel, and decide who is responsible for the tax payment – the employer or the employee. Most important, both say, is to realize that tax mobility is not about collecting perfect data. It's about managing risk. Identify the top risks and develop a policy to mitigate those risks. Then let that policy trickle out across the firm.Blockchain may be the future of stock transactions, but you still need a transfer agent.
In its simplest form, blockchain is what is known as a distributed ledger that can track transactions, such as stock sales and transfers. The concept is that no one owns the ledger, and transactions are recorded live on the ledger, providing full transparency. While such a system could lead to near instantaneous settling of transactions, a transfer agent like Computershare will still be needed for such events as issuances, cancellations, investor communications and corporate actions. These things cannot be decided and launched through a distributed network. They will continue to require a central authority to initiate them. But stay tuned. Computershare continues to work to figure out the best uses of blockchain for its clients.