LVMH has launched "LVMH Shares," a new international employee shareholding plan targeting 70% of its workforce across 11 regions in Europe, North America, and Asia, providing preferential subscription terms to enhance employee involvement in the Group's growth. The initiative reflects LVMH's commitment to its values of innovation, excellence, and long-term partnership with employees, highlighting the crucial role of its workforce. Employees can subscribe to shares at a 20% discount during the subscription period from October 24 to November 13, 2024, with securities delivery scheduled for December 18, 2024, and shares to be listed on Euronext Paris.

Enhancing your global equity compensation strategy requires a deep dive into how participants across the world perceive and engage with these programs.

During a webinar held on 19 September 2024, Emily Cervino and Sarah Francis from Fidelity explored global perspectives, delving into their research that unveiled unique characteristics of equity compensation participants from Canada, China, Germany, India, the UK, and the US.

The session also shed light on how factors such as age and gender influence perceptions, offering invaluable insights into satisfaction, confidence, and educational needs.

In today’s competitive landscape, understanding these nuances is crucial for tailoring strategies that resonate globally, ensuring your equity compensation plans are both effective and impactful.

The rising importance of equity compensation

Equity compensation is a cornerstone of employee satisfaction and retention worldwide. Research indicates that 6 out of 10 companies are expanding eligibility for equity awards, with more than half increasing the value of these awards. As companies expand globally, the need to tailor these plans to meet regional differences becomes increasingly important.

Multinational organizations, some operating across more than 50 countries, must adjust for varying local requirements and cultural contexts to ensure their equity plans succeed.

Regional perceptions and behaviors

The webinar underscored how employees in different countries engage with equity compensation in distinct ways:

• Canada: Canadian participants are highly engaged, with 50% having sought professional financial advice, leading to higher confidence. About 68% plan to use stock plan assets for long-term goals like retirement.
• China and India: In these emerging markets, many participants are first-time stock owners, emphasizing the need for education on financial literacy and the long-term benefits of stock ownership.
• Germany: German participants have strong financial literacy but lower confidence in decision-making due to concerns over stock price volatility, underscoring the need for more structured educational resources.
• UK: Nearly half of UK participants are first-time stock owners with lower confidence, though satisfaction with Employee Stock Purchase Plans (ESPPs) is high due to payroll deductions and discounts. More education could address the knowledge gap.
• United States: In the US, a gap exists between intentions and actions—many plan to use equity compensation for retirement, but few follow through. Clear communication about the long-term benefits can help close this gap.
• India: Indian employees are highly engaged, often seeing equity programs as a primary source of retirement savings. Despite regulatory challenges, participation remains strong, reflecting broad enthusiasm for equity plans.

Actionable insights for a global strategy

Global equity compensation strategies cannot follow a one-size-fits-all approach. To ensure success, companies must adapt their programs to suit the specific needs of different regions. Key recommendations from the webinar include:

• Localized education: Offering region-specific resources and financial literacy tools empowers employees to make more informed decisions, especially in regions where professional advice is less accessible.
• Cultural relevance: Aligning equity strategies with local cultural values ensures better engagement. While long-term financial planning might resonate with Canadian employees, other regions may have more immediate financial concerns.
• Ongoing assessment: Continuously evaluating the performance of equity plans by region helps identify areas for improvement and adaptation, ensuring that the plans meet the evolving needs of the workforce.

In conclusion, tailoring equity compensation strategies to the specific needs of different regions is essential for boosting employee engagement and satisfaction. By providing localized education, understanding cultural differences, and regularly assessing plan effectiveness, companies can create compelling global equity programs that truly resonate with their diverse workforces.

This article is sponsored by Fidelity, a leader in helping organizations maximize the value of their global equity compensation strategies.

Contact Emily or Sarah directly for more information.

View a recording of the webinar on GEOlearn HERE.

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GEO and Fidelity are not affiliated.
Fidelity data as of March 2023.

In a recent webcast sponsored by Global Tax Network and J.P. Morgan Workplace Solutions, experts Tara Hagen, FGE and Chris Dohrmann, FGE, delved into the SEC's new rule that shortens the settlement cycle for equity compensation plans from T+2 to T+1, effective May 28, 2024. This change significantly impacts stock-settled RSUs, stock option exercises, and ADRs, while non-US securities, and FX transactions remain at T+2.

Adapting to T+1: Market reaction and technological adjustments

Discussing the market's reaction, Tara and Chris highlighted that companies are still adjusting to the new T+1 settlement cycle, even a month into the rule’s implementation. While some companies are well-prepared, others are struggling with the substantial process and technological adjustments required. The experts noted that transitioning to T+1 necessitates multiple intraday updates to manage the process efficiently, as opposed to the end-of-day updates that sufficed for longer settlement cycles like T+5. They also pointed out the anticipation for a potential move to T+0 by 2027, which will further intensify these demands.

Benefits, challenges, and the role of AI

Tara and Chris emphasized the dual nature of the T+1 shift, outlining both its benefits and challenges. The primary benefits include reduced risk for investors and enhanced market efficiency, with a strong drive in the US for quick asset access and control. However, the challenges are significant, especially for companies that currently lack the necessary technological tools to cope with the reduced settlement time. The experts also discussed a noted disparity in readiness between the US and Europe, with the latter showing markedly less urgency for T+1 adoption.

A particularly engaging part of the discussion was the role of AI in this new landscape. Despite 87% of webcast attendees not actively using AI in their processes, Tara and Chris made a compelling case for its importance. AI can accurately predict tax impacts and manage extensive data from mobile employees, thereby enhancing efficiency—a crucial factor in adapting to T+1.

Tax implications, compliance, and operational adjustments

The experts also explored the tax implications and compliance requirements under the new T+1 rule. Equity transactions and tax reporting need to be expedited to meet the new timelines. Tara and Chris stressed the importance of streamlining tax processes and ensuring timely updates of employee records, especially for mobile employees. 

In discussing operational adjustments, they detailed the necessary changes in both the pre-transaction and execution phases. Companies must gather detailed employee information, review tax rates, monitor changes in employee status, perform testing, and consult with tax providers to ensure smooth transitions. They also highlighted the need to expedite tasks like determining market price and performing final checks post-May 2024, given the reduced latitude in managing these processes under the new settlement timeline.

Broker and transfer agent adaptations

Tara and Chris provided insights into how brokers and transfer agents are adapting to the T+1 settlement cycle. Brokers have moved to 24-hour operations, and APIs now enable multiple transactions per day. However, the shift to T+0 will require even more robust intraday settlement processes. They noted that smaller, tech-savvy transfer agents are potentially ready for T+0, pending SEC mandates and coordination with DTC and other transfer agents.

Fair market value and tax strategies

A key part of the webcast was the discussion on Fair Market Value (FMV) considerations and tax strategies. Clients often discuss and implement changes, such as moving from T+1 to T (same-day transaction). Withhold-to-cover, while previously more common due to accounting treatment issues, is cash-intensive and requires advance preparation. Sell-to-cover, despite its complexities involving settling sales to pay taxes, remains more popular. Tara and Chris observed that many clients have shifted to real-time or prior-day FMV calculations for vesting, moving away from using averages calculated on vesting dates.

Automation, employee experience, and compliance

Automation emerged as a crucial theme in the discussion, with Tara and Chris advocating for its role in ensuring efficiency and accuracy. Automation reduces manual work and associated errors, which is vital for managing state-to-state and country-to-country tax compliance. They stressed that risk mitigation is a significant driver for automation, especially with increased auditing by states facing budget constraints.

The experts also touched on the importance of simplifying the vesting and exercise processes to improve employee understanding and satisfaction. Clear, simplified explanations and ensuring employees know the reasons behind data requirements can mitigate any frustration and enhance compliance. This focus on managing and monitoring the employee experience is critical in maintaining the attractiveness of stock awards.

Poll results, readiness, and future outlook

A poll conducted during the webcast indicated varying levels of readiness for T+1 and T+0 among companies, with 46% having made changes for T+1, 9% feeling prepared for T+0 and others still working towards compliance. Tara and Chris used these results to underscore the ongoing efforts and challenges companies face in adapting to these changes.

Looking ahead, the industry is moving towards faster data availability and processing. Tara and Chris concluded by emphasizing that companies must continuously improve their systems and processes to stay compliant. The goal is to achieve seamless data integration and real-time processing capabilities to handle market and regulatory demands effectively.

In summary

The move to a T+1 settlement cycle represents a significant shift in equity compensation management, requiring advanced technological solutions, streamlined processes, and proactive tax management. 

Tara and Chris underscored the need for market participants to leverage AI and automation, prepare for further reductions in settlement cycles, and ensure compliance with the accelerated timelines. 

While the US leads in adopting quicker settlement processes, global coordination and readiness remain critical challenges.

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When partnering with GTN, companies gain access to over two decades of specialized mobility tax expertise tailored to support their global expansion. Founded in 2000, GTN empowers clients to navigate the complexities of mobility with confidence. Businesses benefit from seamless, best-in-class mobility tax solutions that address their unique challenges across 150+ countries. GTN's client-first approach ensures that mobile employees feel supported throughout their international journeys. 

Companies experience streamlined processes, proactive cost-saving initiatives, and comprehensive compliance support, all delivered through a combination of personalized service and cutting-edge technology. With GTN, businesses can focus on their global growth strategies while leaving the intricacies of mobility tax management in expert hands. To learn more about how GTN can support your global mobility needs, visit gtn.com.

J.P. Morgan Workplace Solutions

J.P. Morgan understands that your company’s success is driven by the remarkable commitment and dedication of its employees.

Workplace Solutions is a holistic tech and service-based offering, created to empower your team to easily navigate their workplace incentives with confidence. 

From stock plan management powered by Global Shares and financial education to wealth building and beyond - our intuitive solutions help you attract and keep talented people who believe in your company as much as you believe in them.

Contact us today to find out how we can help empower your workforce.

In 2024, Italy saw a surge in the adoption of Broad-Based Employee Share Plans (PADs), with notable companies like Eni and Unicredit implementing them as a form of employee remuneration. PADs allow employees to acquire company shares through purchase or as free gifts, often with incentives like discounts or free shares for those who buy. These plans serve multiple purposes, including attracting and retaining talent, enhancing employer branding, showcasing corporate stability to investors, and fostering a culture of ownership among employees.

The information technology sector leads investments in employee share schemes in Hong Kong, contributing HK$38.5 billion, which accounts for over half of the total annual spend of HK$72 billion among listed companies. The adoption of employee share plans has surged over the past decade, with 83.6% of listed companies now offering them, primarily in the form of share options and share awards, the former being more common among smaller companies. Larger companies tend to have a mix of both options and awards, with the healthcare and IT sectors showing the highest adoption rates for share awards, at 58.7% and 46.6%, respectively.

In 2018, New Zealand reformed the taxation of employee share schemes (ESS), but many aspects of the new rules, particularly regarding employer deductions under section DV 27 of the Income Tax Act 2007, have remained unclear. The recent Interpretation Statement 24/07 provides guidance, indicating that while the Australian case Clough v Commissioner of Taxation could influence deductions, it is uncertain whether New Zealand courts would apply it due to differences in statutory frameworks. The statement clarifies that deductions may be available if cancellation payments to employees are tied to past employment services rather than capital transactions, encouraging employers to design their ESS with liquidity events in mind to avoid non-deductible expenses.

Paytm has allotted 254,908 equity shares to eligible employees under its employee stock option plans, with the allocation approved by the company's nomination and remuneration committee. This allotment increases Paytm's paid-up equity share capital to INR 63.66 crore, with the newly issued shares valued at INR 5.65 crore based on the last closing price. The move comes amid challenges for Paytm, including regulatory issues with the Reserve Bank of India and significant financial losses, but the company has also received government approval for investment in its payments arm, enabling a payment aggregator license application.