Get direct guidance from our advisory services practice on recent industry developments, best practices, and more.

In this issue, we cover the following topics:

Read Previous Editions

Participant’s Sale Proceeds During the Pandemic

Does Computershare have any data about the impact of the pandemic on a participant's decision to sell shares? We are specifically looking for insights on whether having access to a share plan during the pandemic has given participants a greater sense of security/financial well-being.

Computershare recently surveyed nearly 400 share plan participants around the world to understand the impact of the pandemic on their decision to sell shares. While the survey was conducted by a European affiliate and centered around the European market, we believe there is still a lot of relevance to the North American market. Our objective was to learn more about why participants recently sold their shares and whether the pandemic had affected this decision, with a focus on understanding participant's sense of financial wellbeing during this time and their engagement as a shareholder. We provided two related statements and asked participants to what extent they agreed.

  • Statement 1: "Having employee shares has provided me with a sense of security and increased financial diversification and wellbeing during the pandemic."
  • Statement 2: "I feel more engaged with my company because I am a shareholder."

The good news is that in both scenarios more than half of participants said they agreed (55% of respondents said having employee shares has provided them with a sense of security, and increased financial diversification and wellbeing during the pandemic). These results are consistent with other similar Computershare and industry-wide studies, which consistently show that participants that take part in an Employee Stock Purchase Plan (ESPP) or other equity plan have a greater sense of financial well-being. They also speak to why companies need to have these plans in place and the importance they take during a crisis.

These findings were covered in detail at a recent Twin Cities NASPP Chapter Meeting by myself.

Trends in European Share Plans

Regrettably, I wasn’t able to attend Computershare’s North America Client Conference in June and wondered if you could share highlights from the session, “Spotlight on EMEA”? I'm simply interested in a quick summary of share plan trends happening in the European market.

During the session, "Spotlight on EMEA", Jay Foley, Managing Director of Computershare's EMEA employee share plans business, shared some interesting insights and observations about the share plans marketplace in Europe. In brief, Jay indicated that:

  • There has been a noticeable renewed appreciation by companies on the importance of equity in attracting and retaining employees, which has been seen through one-off special awards (in new plans or part of an existing plan) as a way to thank employees for continued service.
  • While not necessarily a trend (yet), there has also been greater use of share options to middle management and above. It's unclear whether this is a growing trend or unique to the pandemic.
  • There has also been a significant increase in the number of companies actively promoting and encouraging employees to participate in their AGM and proxy voting, and a tremendous amount of corporate action activity. Jay says, "this is the highest volume of corporate action activity he has seen in over 10 years, as many companies are actively restructuring, acquiring businesses, raising capital or selling to private equity firms."
  • SAYE plans, common in the UK and Ireland, continue to experience ongoing challenges for various reasons, including issues related to plan value for both the participant and the company, the unfavorable corporate accounting costs when a participant exits a plan and enters a new plan at a lower price, and the only program savings carrier in the Ireland market is exiting the business with no likely bank to pick up the service.

Clients who were not able to attend our conference in June are encouraged to ask their Relationship Manager about additional insights from this session.

Share Ownership in Race and Gender Wealth Equity

What can you tell me about the role of share ownership in race and gender wealth equity?

Workers in low-wealth households face serious barriers to achieving common financial goals, such as owning a home, investing in education, starting a business, or saving for retirement, and the pandemic has only exacerbated and heightened awareness of these inequities. Furthermore, there is a huge gap in equity wealth by race, and this is more pronounced when including gender. This is important because wages these days are not what’s driving wealth, equity and shares of profits is what’s driving wealth. We believe employee ownership should be a topic of conversation for all businesses and workers. For workers, employee ownership creates real economic stability. Employee-owners experience financial advantages on many levels, including equal or better pay and benefits; asset building and/or retirement savings; shared business ownership; and enhanced job security, stability and well-being and financial safety. Ownership is also proven to shape employees' actions and perceptions related to participation, inclusion, value, trust and fairness. It's an effective instrument for attracting, retaining and motivating the right talent and fosters alignment with stakeholder interests by enabling execs and employees to act like owners and participate in the success of the company.

All households need a financial cushion to address emergencies, to invest in opportunities, and to achieve mobility. We are at a unique place in history, which demands new thinking, a mounting sense of urgency to find practical solutions, and the application of fresh views on employee ownership. This timely topic was discussed in greater detail recently during the session, Race and Gender Wealth Equity and the Role of Employee Share Ownership, at GEO's 22nd Annual Virtual Conference on September 23rd where I was joined by two leading employee ownership advocates Dr. Joseph Blasi of Rutgers University and Jenny Weissbourd of The Aspen Institute. An on-demand recording of this session is available for premium passholders of the conference for one year.

Computershare is proud to have sponsored GEO's Annual Conference again this year; we really enjoyed coming together to speak about the share plan industry's hottest issues.

Issuing RSUs in China

Could you walk me through your experience with a company that has successfully issued RSUs in China?

Restricted Stock Units (RSUs) in China are generally taxed at vesting together with an employee's salary income and it is the local employer's obligation to withhold the individual income tax. Where share plan awards are post-IPO and registered with the local tax authorities under Circular 35, a preferential tax calculation method would apply.

Generally any public company that wants to grant RSUs in China is required to submit applicable documents translated into Chinese to the relevant local tax authority through its Chinese subsidiary for preferential tax treatment to employees in accordance with the requirements of Circular 35. This permits employees to enjoy favorable tax treatment in connection with their awards. The documents that must be submitted vary by region, but typically include: an application form, the plan, award agreement and grant notice. Private companies are not entitled to the favorable tax treatment.

Because China does not generally allow monies to flow to and from employees directly, approval from the People's Republic of China (PRC) State Administration of Foreign Exchange (SAFE) under Circular 7 is also required, which typically takes three months. Approval enables SAFE to monitor and enforce that all proceeds realized by individuals from equity-based awards be immediately repatriated to the PRC through a special "dedicated" foreign exchange account set up by the company in the PRC. Having a local team on the ground who can assist in communicating with SAFE officials and local banks through the SAFE registration process is critical.

Our experience is that Chinese employees are very keen on becoming shareholders in overseas listed companies.

Computershare Plan Managers Asia has successfully issued RSUs in China over the past 15 years for over 80 clients. We have extensive experience in working with SAFE officials and different local banks. We can also provide support with the Circular 35 tax registration. Our proprietary plan management system automatically calculates and withholds China tax for the local employer and allows participants to see the estimated tax amount when they elect the release method, so that they can decide if they would like to hold all, sell to cover, or sell all for the vesting.

These solutions have helped many of our clients successfully navigate the complex China market compliantly, efficiently, and effectively. Learn more about Computershare's China Share Plan Solutions.

Deferring Canadian Income Tax for RSUs

Is it possible to defer Canadian income tax for RSUs, and if so, what are the rules?

We have seen a small percentage of restricted stock arrangements structured such that participants can (a) in cases where there are multiple vesting tranches, defer redemptions (and therefore receipt of payment and taxes) of initial vesting tranches to later vesting/redemption dates, and (b) in cases where there may or may not be multiple vesting tranches, elect for a redemption date (for receipt of payment and taxes) of their choice post-vesting and before expiry. While the final vesting/redemption date is typically no later than December 31st of the third year following the year of the grant, we have occasionally seen scenarios where participants may elect for redemptions beyond this date. Plan sponsors contemplating vesting/redemptions occurring beyond this date are encouraged to speak to their tax/legal counsel to ensure that their plan is properly structured to permit this without triggering onerous tax implications.

We have several offices across Canada with our team of experts happily supporting over 160 clients and almost 280,000 participants with their share plan and trust needs.

Special thanks to Sean Davis, Computershare Senior Solutions Specialist, for his contribution to the response of this question.

Have a question you need answered?

Robyn Shutak leads our equity advisory consulting services to help our clients get the most value out of their plans. She is available to discuss trends in plan design, enhancing your employee communications, outsourcing opportunities, and a whole lot more. Submit your question in the form below and receive an answer from our employee equity plans expert, Robyn. Your question could even be featured in our next issue of Q&A.