Top 10 Proxy Checklist
Stock Administration has an important, but varied, role in the proxy process. Depending on the department stock reports to in your organization, you may responsible for duties ranging from simply running reports containing the needed data to completing director and officer questionnaires to coordinating the annual meeting. No matter what your responsibility level, these are the items you must have for a smooth and successful proxy. Some of these items can be found in reports that your equity administration system will generate for you.
1Who are the “big 5”? You can’t run stock ownership numbers if you don’t know who your named executive officers are. These will be anyone who served as Chief Executive Officer or Chief Financial Officer as well as the next three most highly compensated officers in the company.
2List of all Forms 3, 4 and 5 filed during fiscal year: Years ago director and officer questionnaires were blank documents that had to be filled in by each officer and director by hand. Over the years that has changed and companies now pre-complete a majority of the information for the officer or director. Recently that has included a table of all the Section 16 filings made on behalf of the officer or director during the fiscal year. This can be an arduous task, so make sure you keep good records of all the filings throughout the year.
3List of all exercises/releases during fiscal year: This is a standard item of information that is easy to pull out of your equity administration system. These numbers are reported on the Exercises and Stock Vested table.
4For officers, the list of 401K matching transactions in stock: If your company matches 401(k) contributions in company stock, you will need to provide the number of “match” shares distributed to each officer’s 401(k) account.
5For officers, grants outstanding with valuations for the last three fiscal years: These need to be disclosed in the Summary of Executive Compensation table.
6For officers, grants outstanding with vested and unvested shares: These grants and the vested/unvested numbers will be reported on the Grants of Plan-Based Awards table.
7For directors, grants in the last fiscal year with the associated valuation.
8Vesting schedule details for outstanding grants: The vesting schedule will be needed for any outstanding grants in order for accurate numbers to be calculated concerning vesting at termination (the Potential Payments to Executives Upon Termination or Change in Control) or the number of shares beneficially owned (Beneficial Ownership table).
9Shares issued and outstanding as of the record date: This number will be disclosed in the proxy and also used in calculating the percentage of shares beneficially owned in the Beneficial Ownership table.
10Officer and director holdings: If your company has ownership guidelines, someone will ask for the officer and director holdings to see if the officers/directors are in compliance. This may include any or all of the following: shares owned by the officer/director directly, shares owned by the officer/director indirectly, vested options and unvested RSUs.
SOS Stock Plan Outsourcing
Full-time expertise at a part-time cost
Because It's All About That Data
In stock administration, our world is filled with data. Good data, bad data and incomplete data. How can you sort out the good from the bad and incomplete? And once you identify bad or incomplete data, how do you correct it? Ask yourself these questions about your data and you can identify some common data quality issues.
Do data fields contain missing values or zeros?
Sometimes a zero is valid in a data field. If an employee terminates before their grant vests, you would expect to see a zero in the “vested” data field. But what if the number of shares granted is 0? This can be the result of a data entry mistake or an export gone wrong. If you see a zero in a field that you think should have a number greater than zero, ask your data source what this means.
Why do I feel like I am missing something?
Sometimes you look at data and know you are missing something. If you are looking at data for a company based in California and you don’t see any employees with a California address, speak up! Your data may be truncated or incomplete.
Haven’t I seen you somewhere before?
Sure, employees may receive multiple grants and have multiple rows of data. But if the exact same information appears in your report twice you should investigate.
Can you repeat your name for me?
If your data contains names from a culture you aren’t familiar with, how do you know which name is the first name and which is the last name? It might seem obvious to some that in the entry “David Taylor”, David is the first name and Taylor is the last name. But if you discover “Taylor David” in the data, is it the same person? If you are working with diverse names you need to confirm the first name and last name columns by asking the source.
And is it possible that you have someone who goes by a nickname? (Is William Smith the same person as Bill Smith?) Or a middle name? (Is Roger F. Doe the same as R. Frank Doe?) What about common names: are the three David Johnsons listed in your data different individuals?
How do you spell that?
Beware the spelling mistake. Spelling mistakes are huge indicators that the data is hand entered or hand compiled. Looking at employee’s names won’t necessarily clue you in, but checking common items like cities or countries will help you understand how much auditing the data may need.
What day is it?
Being international can present a host of problems, beginning with how you record dates. Which date is April 10, 2015?
If you are European, you answered A. If you are American, you answered B. Make sure to ask if your data comes from US or non-US sources to avoid confusion.
What’s in a (field) name?
In regard to RSU/RSA data, what does the field “vested” mean? Is it the same as “released”? What about “lapsed”? Shares can be vested, yet unreleased if the employee elected to defer delivery of the shares. Most stock administration systems will use equivalent terminology in their reporting, but beware of data that doesn’t come out of a system. To someone using a spreadsheet to track equity outside of a system, terminology isn’t universal.
Isn’t that strange?
Any of these numbers in your data may indicate a problem:
65,535: Microsoft reports that in an unpatched version of Microsoft Excel 2007, some mathematical computations will display incorrectly as 65,535. You don’t have to worry if you are running Office 2007 or a later version, as the bug was fixed in Office 2007 and later versions.
999-99-XXXX or 123-45-6789; If you see these numbers in a field that should contain a social security number, you have bum data. Some administrators use the 999 method to give international employees a fake social security number that they can use for a login. The XXXX portion is usually an employee ID number.
2,147,483,647 or 4,294,967,295: Despite the tendency to attribute these numbers to excessive executive grants, these numbers indicate an error in the underlying program that produced the data.
555-3485: Any telephone number that begins with 555 is usually a fake or a placeholder.
Why do I only have 65,536 rows in this spreadsheet?
At one time, Microsoft Excel only allowed 65,536 rows in a spreadsheet. If you have exactly this number of rows, you have truncated data. Go back to the source of the data and ask for the full data set. Microsoft fixed this in newer versions of Excel and the limit is now 1,048,576 rows.
Most companies don’t have this much data. However, I recently worked on a database conversion for a company that was 37 years old. The option grant file alone was over 101,000 rows long!
Why does this data contain dates from 1900 or 1904?
Excel starts counting dates at January 1, 1900, except in the Excel version for Macs, which starts counting at January 1, 1904. Data entered a variety of ways can end up as one of these two dates. Chances are your company didn’t exist on either of these dates, so this data has problems.
Does formatting really make a difference in data quality?
Frequently grant numbers and employee IDs begin with leading zeros. But if these were dropped when the data was extracted, you can end up with data that doesn’t tie out. Conversely, if leading zeros were used and then discontinued, you may have duplicates in your data. For example, grant numbers 0001 and 1 will appear the same in a spreadsheet where the data was exported incorrectly and the leading zeros dropped.
And the formatting fun continues: dates that were converted into general number formatting in Excel will become 5 digit numbers. For example, 1/1/2015 becomes 42005. This fix is relatively easy: just highlight the data, and change the format to date, instead of general.
Where in the heck is Mu�chen?
To computers, letters are represented as numbers. Problems arise when special characters are included in the data and the computer doesn’t know how to “translate” these characters from numbers to letters. One of the most common characters is the umlaut, used primarily in the German language. (It is that pair of dots used over vowels.) Müchen, the German word for the city of Munich, often falls prey to this problem. This problem is most often seen in Excel, which is built to process numbers, not different languages.
How do I audit data in a pdf?
Beware if you ask for data in “soft copy.” You may receive data that converted into a pdf. If there is data you need in a different format inside the pdf, and you have Adobe Acrobat Pro, you are in luck. It contains a feature that allows you to export tables into Excel.
If you have data in a pdf that comes from a scanned document, it may be tricky to convert it into Excel. This can result in the data converting in a text format. It would be best to go back to the source and ask for the original file instead of scanned documents, if available.
Who entered this data?
Beware that you may have to get creative when auditing and decoding human entered data. Human entered data is prone to errors and inconsistencies. For example, I once reviewed the database belonging to a company headquartered in Pittsburgh, Pennsylvania that contained the address: London, Pennsylvania, US. The zip code was missing, so I scoured the internet for a city named London in the state of Pennsylvania. There wasn’t one. There was a London, California and London, Ontario, Canada. I wondered if the city should have been New London, which is located in Connecticut. I finally abandoned my search and I asked the person responsible for the data entry. She confirmed that she didn’t know where the city of London was, assumed it was in her home state of Pennsylvania and was looking for the zip code as we spoke. Turns out the company opened a branch in London, United Kingdom and she was unaware.
This data is as of what date?
Most reports will display an “as of” date. But what about exports from databases? Most exports don’t contain any as of date, so it is best to ask for confirmation, rather than to assume. In merger and acquisitions, the due diligence materials you receive containing data you are reviewing may have been generated months before.
It is so easy to receive bad or incomplete data, so be sure when you receive any type of data you run a critical eye over it. Never be afraid to go back to the source and ask for clarification on the data or any support that may exist for the data.
Let SOS File Your 3921 and 3922 Forms
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Product Spotlight: ESPP Expense Application
Expensing can be one of the more difficult aspects of administering an Employee Stock Purchase Plan depending upon your equity software and your plan rules. Many current equity platforms limit your ability to determine ESPP expense at a participant level, handle modifications due to contribution increases or plan reset and rollover features. Some platforms offer no ESPP expense assistance at all.
SOS has been assisting clients with their ESPP expensing needs by creating excel files that can be extremely cumbersome and prone to human error. We have used those experiences to design a more systematic approach using client source files and an Access based application to develop detailed and summarized output to support your expense needs.
Here are some features of the SOS ESPP Expense Application:
• Consistent client source input files
• Automated output in Excel format for easy review
• Details on a participant level
• Summary at client specified user field
• Modification Accounting details
• New grant expense related to contribution increases
• Incremental expense for each reset or rollover event
• Documentation for auditors
• Application White Paper
• Output field definitions
• Timely Reporting
• SOS will establish client calendar for each purchase period
Call us today at 408.979.8700 to learn more about the application and how SOS can help with your ESPP expense.
November Market Research Survey
Complete the survey and be entered into a drawing for a $100 Visa gift card!
Periodically, SOS will ask for issuing companies' participation in a market research survey to enhance our understanding of current practices and trends in the industry and to provide our clients insight into the practices of other issuing firms. Our surveys are brief, taking no more than 5 to 10 minutes to complete.
Please note that only issuing companies, not vendors or consultants, should complete the survey and are eligible for the drawing. Thank you for your cooperation!
Across Our Desk
Dan Walter covers one of our favorite topics with 4 end-of-year tips that should come in handy
Speaking of favorite topics, Dee Crosby was interviewed in the NASPP Blog about her conference presentation: Hitchhiker’s Guide to Stock Plan Administration Consultants.
CFO.com highlights a key finding from the Equilar’s equity compensation trends report for 2016.
The rising importance of the Employee Stock Purchase Plan as a key benefit is covered by CNBC.
We heard a lot about this at the NASPP Conference this year: Group Five releases annual ratings of corporate stock plan administration service providers.
An innovative approach to equity compensation in the freelance economy. Should be a big topic in the coming years.
SOS ESPP Expensing Edge Application
Expertise meets technology.
NASPP Career Corner Blog: A Year in Review
For those of you who have not yet visited the NASPP Career Center, the page houses resources for both employers and job seekers in our industry. I was invited to be a guest blogger on career topics back in May of 2013 and have continued to write for the Career Corner ever since.
Upon reflection, I can see that 2016 was about taking your skills to the next level professionally. From resolving conflicts and being of service to building your brand and attracting top talent, the blog explored ways that readers can unite their passions with their work and be more genuinely and authentically themselves in their professional lives.
“Who am I?” “What is my purpose in life?” “What do I want to be known for?” “How am I making a difference in the lives of others?” These are some of the big questions posed in Branding Basics: Four Steps Towards Building Your Personal Brand. I am energized by the idea that we can actively and intentionally build a brand for ourselves, one that reflects our core values and unique value proposition. Unlike the processed and packaged brands we find on store shelves, our personal brand reflects the commitment we make to ourselves to show up everyday living by our core values and sharing our one-of-a-kind gifts with the world.
What seemed to strike a chord in the hearts and minds of some of our readership was the theme of servant leadership. After reading Being of Service: Three Benefits of a Purpose-Driven Workday, some readers commented that in an industry like ours, servant leadership is not frequently discussed. The idea that we have an opportunity to make a difference in the lives of those with whom we work is certainly not a new one. That being said, in a fast-paced, numbers oriented industry such as ours, we can easily lose sight of that opportunity.
The Win/Win philosophy is one that I strive to embody in my day-to-day life. When conflicts occur, it can be easy to take sides and pit “us” against “them.” Yet, inherent in any conflict is opportunity. In Beyond Defense and Offense: Four Steps Towards Taking the Conflict Out of Conflict Resolution, I discuss some of the ways that one can approach challenging conflicts on the job that can lead to greater trust and a brighter future of mutually beneficial teamwork.
The theme of going deeper also found its way into 4 Tips for Attracting Top Talent. Though solid compensation and benefits packages are fundamental when it comes to wooing high performers to join your team, the intangibles are surging to the top of many job seekers’ priority lists. Leading edge companies are cultivating a corporate and departmental culture that ties job performance success to a greater purpose and engaging employees by aligning their passions with their responsibilities. Discerning recruits are holding out for a company that facilitates a more organic and authentic work/life integration that honors them as human beings and supports them in achieving their personal and professional goals.
2016 has been a great year for exploring the possibilities for turning our careers into our vocations and making the world a better place through our everyday approach to our work and our lives. I look forward to continuing to explore these ideas in the year to come.
Andrea Best, Ph.D., Stock & Option Solutions, Inc.
Upcoming Equity Compensation Webcasts
Our webcasts cover high-priority equity compensation topics
Solutions Webcast: Savin' Time with Tech Tools
Tuesday, November 29, 2016 11:00 AM PST
Tired of formatting payroll files? Dread sending out individual confirmations? Need a special customized statement for a specific population that your equity system doesn’t produce? Join SOS’s Sorrell Johnson and Srinivas Kalakoti for a demo on how SOS’ tech tools can simplify your life!
• Srinivas Kalakoti, Stock & Option Solutions, Inc.
• Sorrell Johnson, CEP, Stock & Option Solutions, Inc.
(As this is a webcast dealing with SOS products and services, NO continuing education credit is available for attending.)
Solutions Webcast: SOS Stock Plan Outsourcing
Tuesday, December 6, 2016 11:00 AM PST
Stock plan outsourcing is not only where the biggest things are happening here at SOS, but we are also the fastest growing outsourcer in the equity compensation industry. With all the expertise it takes to run a stock plan, it is becoming next to impossible for most companies to manage things in house…which is where we come in. Join us to learn more about how SOS can make your stock plan challenges disappear. In this special webcast, you will hear:
• What makes SOS Outsourcing different and better than any other way you could manage your stock plans
• How our service will be customized to meet your company-specific requirements and equity plans
• From our customers, who couldn’t be happier after making the decision to use SOS
• Why we are the only truly complete outsourcing solution in the industry
• What we will do for you on the legal/Section 16 and Financial Reporting side
• Who makes up our team
• How our implementation sets us up with our clients as partners, and ensures a fully integrated solution
• About our pricing
• Madori Playford, CEP, Stock & Option Solutions, Inc.
• Scott McDonald, Stock & Option Solutions, Inc.
(As this is a webcast dealing with SOS products and services, NO continuing education credit is available for attending.)
Educational Webcast: Weathering the Storm - From Private Company to Public Company
Tuesday, December 13, 2016 11:00 AM PST
If you are in the process of becoming a public company or just thinking about an IPO, join us for some interesting tips and discussion of what you might encounter during this journey.
Our two experts have navigated these challenging waters and will share their experiences as they discuss numerous topics such as broker and transfer agent selection, employee communications, grant process, taxation on exercise of options or release of restricted stock units and employee stock purchase plans.
• Rachel Southorn, CEP, Stock & Option Solutions, Inc.
• Madori Playford, CEP, Stock & Option Solutions, Inc.
(One hour of Certified Equity Professional continuing education credit is available for attending. See the CEPI website for more information on CEP continuing education requirements.)
...tender tidbits about people and players in our industry...
Fitting in somewhere new…Gilbert Szeto is now a Regional Sales Manager for TD Ameritrade. Jennifer Lopez is now the Vice President, Marketing and Development at WFFConnect. Barbara Waters is the Equity Compensation Director for Aetna. Nina Chellew is now the Manager, Equity Administration for Seagate Technologies plc.
Gettin’ a feel for that Texas BBQ… The SOS Team had a great time at the booth at this year’s 24th Annual NASPP Conference in Houston, Texas. It sure was a boot stompin’ good time with $800 in cash prizes, fun giveaways, and the chance to meet and greet with old and new friends. Check out our pics from the event!
She found the perfect dress…Julie Kenia of SOS and her husband, Ken, gave away their daughter, Justine, on September 30, 2016 in New Jersey. Rumor has it that guests caught her calculating quarter end ESPP expense during the reception!
Growing families… Dan Schwab of Charles Schwab and his wife, Jen, welcomed a son, Rex, on 10/2/16. Weighing 7 ½ pounds, and 20 ½inches. Two year old Colette is a proud big sister. Bill Storey of SOS and his wife, Tanya, and son Jordan, welcomed the newest edition to their family, a baby girl, Rali Harper Monroe, on October 19, 2016. Rali weighed 5lbs 14oz. and was 19.25 in. long. Mom and baby are doing well, Jordan has accepted his Big Brother responsibilities (except diaper changing duties) and Bill is over the moon!
Wearing Mickey ears… Scott McDonald of SOS and his wife, Erin, took their daughter, Savannah, to Disneyland for the first time this month. This princess was all smiles meeting Princess Ana from Frozen!
The 24th Annual NASPP Conference & Exhibition Wrap-up… The 24th Annual NASPP Conference in Houston was an unqualified success! With close to 100 sessions on today’s hottest topics, led by nearly 200 of the top minds in the industry, the Conference was an educational and networking extravaganza. Highlights included an inspirational keynote address by former Texas Senator Wendy Davis, the unveiling of the new NASPP website, and the NASPP shuffle dancers. See pics from the Conference in the NASPP Blog.
SOS’s new team member
Linda Barkley - People Solutions Team
SOS Xtra Editor: Shawna Casey
Did you miss an issue of Xtra? View our complete newsletter archive from our website here.
Miss a webcast? You can find links to recordings, as well as the materials, on our webcast page.
Information provided in this newsletter is designed for educational and entertainment purposes only and is not provided as professional service or advice. Moreover, this newsletter should not be relied on as legal, accounting, auditing, or tax advice. Anyone reading this newsletter should not act upon this information without seeking professional counsel and/or input from their advisers. The preceding information does not necessarily represent the official views of Stock & Option Solutions, Inc. with respect to any of the issues addressed.
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