Thanks for reading my Admin Super Powers blog series on stock and option plan administration. I’m coming to IAAP Summit 2016 in Hollywood, FL this July. It would be great to meet all of you!

My company would like to know the equity plan administration needs and wants of conference participants. Please complete this 3-question survey to help me get a general idea. Your answers are very much appreciated. See you at the Learning Table sessions at IAAP Summit!

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As I mentioned in the last blog, stock plan administration covers four distinct areas of knowledge – administration, corporate and securities law, tax regulations, and accounting standards. It sounds easy to compartmentalize, right? But it’s more like a spiderweb. Every area affects and is affected by every other area. When asked what I do for a living, I tell people I assemble jigsaw puzzles. Really.

The foot bone’s connected to the leg bone…or is it?

The foundation of good administration is keeping all the dots connected. Since you’re already a Super Admin on so many levels, you know the path from any beginning to any goal is filled with details outsiders overlook when they want something in a hurry – like the talus between ‘dem foot bones and leg bones. And, like the talus, it’s the connecting details that make a process flexible or rigid.

For stock plan administration, organization is critical because it keeps your company from violating securities laws, tax regulations, and accounting standards. When your company undergoes an audit or corporate transaction (e.g., merger, acquisition, IPO), having processes in place can mean the difference between high fees, monetary penalties, extended (painful) time in completing the event, disqualified plans or awards, and potentially failed deals OR normal fees and smooth sailing. We like smooth sailing, but that’s a different metaphor. If you’d like a good laugh (or gasp, or cry in some circumstances) you can read about some real life process failures big and small in my book “If I’d only known that!”

The skeleton crew

Whether you’re doing the administration, or are part of the team that gets it done, these are essential transaction-related questions to have answered:

• Only the Board of Directors can authorize stock and options, who
  • prepares the grant list for the board? (and verifies that all of these other questions are answered)
  • provides the plan administrator with the approved list?
  • verifies that the tracking technology correctly shows the details of the grants?
  • prepares the grant documentation?
  • provides the grant documents to the award recipient?
  • ensures that the recipient properly accepts the award?
  • archives the acceptance evidence, and is it paper or digital?
• When an optionee leaves the company’s employ, who
  • tells the plan administrator about the termination? And within what time period?
  • updates the database and provides the optionee with a statement of vested/unvested options?
• When an optionee wants to exercise, who
  • tells the optionee how many shares are vested or can be exercised?
  • receives the notice of exercise?
  • receives payment for the exercise and how does payment get into the company’s books and accounts?
  • processes the exercise in the databse?
  • prepares the stock certificate?
  • manages delivery and receipt of stock certificate?
  • prepares and sends required exercise reports to the stockholder and IRS?

These are basic transaction questions. You can find detailed checklists and templates in my book “Private Company Equity Compensation Administration Toolkit”. Next month we’ll look at more plan administration best practices in Admin Super Powers.

Achaessa James has worked in equity compensation since 1999 in the legal, venture capital, and equity administration outsourcing fields. She is a senior Equity Compensation Consultant with Stock & Option Solutions where she supports clients with system implementations, data migrations, corporate governance audits, corporate transaction preparation, and special project design and implementation.   She is also the consulting Equity Compensation Product Manager for the National Center for Employee Ownership where she manages the highly regarded twice-yearly CEP Exam Prep Course, and serves as the NCEO’s subject matter expert on equity compensation.

Achaessa’s focus on privately held companies has earned her a deep expertise in pre-IPO and M&A equity planning and audits, and best practices in administration and technology. She speaks on these topics at industry conferences and in webcasts, and is a published author with books including “If I’d Only Known That!”, and “The Private Company Equity Compensation Administration Toolkit” as well as many newsletter articles in industry publications. You can connect with Achaessa on LinkedIn.