By Marisa Ruffles. Tax accounting, modifications, retirement provisions, SEC disclosures….it’s enough to make your head spin. When it comes to equity compensation management, the complexities are endless, but what does Barbara Baksa, Executive Director of the National Association of Stock Plan Professionals, declare as the stock plan area that companies get wrong most often? Educating their employees.
That’s right, even with all the regulatory landmines surrounding equity plan management, in Baksa’s opinion the most critical piece, and the area that companies neglect to focus on, is building a strategy for educating and communicating to employees about your company’s equity plan.
“Employee education is one of the things companies get wrong more than anything else. It’s the most neglected areas of stock plan administration,” said Baksa.
For the average employee, even the simplest of equity awards can seem complex. The basics on terminations, taxation, vesting, how to initiate/complete transactions and tips for interacting with a broker are all important aspects that you want your employees to understand at a high level, but arguably more important than these items is communicating the strategic value proposition of the awards they’re receiving.
Baksa advises, “If your employees don’t understand what they have, then what they have is a lottery ticket. If they don’t understand how the award works and how it can eventually create wealth for them, they don’t even think about it as part of their compensation.”
That’s a problem. Think about it. The main goals of an equity compensation program are to 1. attract top talent, 2. motivate employees to act and think like owners, and 3. retain your best people; if employees can’t connect the dots from their equity awards back to their compensation, the value is completely lost.
To effectively educate employees about equity compensation, you need to build a strategy to ensure you’re communicating the right message in the right format at the right time. You can find some great tips in this Certent Insider blog about how to Effectively Educate Your Stock Plan Participants.
One last hot tip? Baksa suggests working with a marketing professional to get the messaging right because “ultimately what you’re trying to do is market this program to your employees.” We agree with that and would challenge you to think about Who’s On Your Stock Plan Communications Team?