GEO INSIGHTS

As 2026 begins, companies face a complex landscape of economic uncertainty, regulatory changes, and M&A activity, making the attraction and retention of key talent critical. Key developments include increased scrutiny of proxy advisory firms, evolving state and federal rules on restrictive covenants, potential SEC amendments to executive compensation disclosure, and new insider reporting obligations for foreign private issuers. In M&A contexts, early planning for executive transitions, equity award treatment, and retention incentives is essential, while companies are advised to regularly review compensation frameworks to balance legal, tax, and governance considerations and maximize long-term shareholder value.

Section 6039 of the Internal Revenue Code requires companies to provide Forms 3921 and 3922 to employees who exercised incentive stock options or first transferred ESPP shares during 2025, with employee statements due by February 2, 2026. Employers must also file these forms with the IRS by March 2, 2026 (paper) or March 31, 2026 (electronic), with electronic filing mandatory for companies submitting ten or more forms of a given type. Failure to file or furnish the forms on time can result in significant per-form penalties, making timely compliance critical for corporations administering equity plans.

The annual deadline for employers and trustees to report all 2025 share scheme activity to Revenue is 31 March 2026, with different forms required depending on the type of share incentive and event, filed either online via ROS or by paper. Non-compliance can result in financial penalties, loss of tax-advantaged scheme approval, and Revenue intervention, with share schemes under increased scrutiny in recent years. Employers and trustees should now review and reconcile their 2025 activity with payroll records, ensure correct tax reporting, and consider whether their share schemes remain aligned with business objectives.

JPP Law warns that common mistakes in EMI share schemes—such as using ordinary shares instead of tailored employee classes, mismanaging vesting versus exercise, or failing to comply with reporting and filings—can permanently forfeit valuable tax relief for startups. Founders must also ensure schemes align with company Articles, investor agreements, and leaver terms to avoid disputes, while keeping careful records and annual compliance to maintain EMI status. With EMI thresholds set to expand in April 2026, companies should review existing arrangements and plan new grants carefully to maximize benefits and avoid costly errors.

GMS Agency has transitioned to an employee ownership trust (EOT), with the EOT acquiring a majority stake while co-CEOs Sam Elder and Phil Craghill remain in leadership and as the largest individual shareholders. The move aims to align the company’s long-term vision with employee interests, safeguarding its culture, values, and independence while supporting sustainable international growth. Following strong revenue increases—18.75% in 2025 and over 220% since 2020—the agency seeks to ensure that those who contribute to its success directly share in its future.

As countries implement new regulations affecting global equity and executive compensation for 2026, multinational companies should review their equity plans and grant materials to ensure compliance with updated tax, securities, and employment laws. Key developments include the removal of certain reporting and forced-sale requirements in China, expanded securities exemptions in Japan, new pay transparency obligations in the European Union, updated SEC requirements in the Philippines, and clarified national insurance sourcing rules in the United Kingdom, along with broader global trends such as rising tax rates and limits on restrictive covenants. Proactive coordination among legal, tax, payroll, and equity teams is essential to manage compliance, reporting obligations, and strategic planning in the year ahead.

The UK Budget’s expansion of EMI share scheme eligibility will allow up to 8,250 additional businesses, including many scale-ups and founder-led companies, to offer tax-efficient employee share options, doubling the employee limit to 500 and increasing the assets cap to £120 million from April 2026. This move provides a powerful alternative to rising salaries, helping employers attract, retain, and engage talent by giving employees a stake in long-term business growth, which is linked to higher productivity and stronger retention. HR leaders must strategically design and communicate these schemes to ensure fairness, clarity, and maximum cultural and financial impact, making EMI a key tool in modern total reward strategies.

From 1 January 2026, Guernsey will tax share-based benefits at vesting or exercise rather than at grant, allowing a deferral of up to seven years and aligning taxation with when employees actually receive economic value. The taxable amount is still calculated based on the grant-date value, providing certainty for employees and employers, but accelerated taxation applies in cases of death, retirement, termination, or departure from Guernsey. This change makes Guernsey more competitive for attracting talent and innovative companies, particularly in tech and startups, and organizations should review existing share schemes in light of the updated Statement of Practice E43.

OpenAI is reportedly paying employees an average of $1.5 million each in stock-based compensation, making it the most generous major tech startup by far and pushing equity pay to nearly half of projected 2025 revenue. The payouts—driven by fierce competition for elite AI talent, especially from Meta—dwarf pre-IPO compensation at companies like Google and Facebook and are projected to add about $3 billion a year in stock costs through 2030. While the strategy helps OpenAI retain top researchers during the AI arms race, it has also significantly inflated losses and highlights how far the company has moved from its nonprofit origins toward an equity-heavy, hybrid commercial model.