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January 29, 2010
Volume 3, No.1

In this Issue:

Foreword to 2010

Webcast on February 24th - Opting for Outstanding Outsourcing: Best Practices for Outsourced Stock Plan Success

Money Makes the World Go 'Round, Part III: Update on India FBT

Product Spotlight: SOS People Solutions

ShareComp 2010

SOS Across Our Desk

SOS Xposé

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Foreword to 2010

January 2010...such a breath of fresh air!! We are all starting to feel the excitement of new beginnings - a new year, a new decade and a new attitude. Everybody I talk to is ready to put 2008 and 2009 behind us and get on with the good things in life.

As equity plan professionals, we look forward to exercise activity and excitement around the programs that are our livelihood. We imagine employees thanking us for helping them to exercise and sell their shares...because now they can pay for their child's college tuition. There will be a day when the words backdating and restatements and The Economy will be replaced by compensation, capital gains, and in-the-money.

Here at SOS we love all things new. This year, we are thrilled to be a gold sponsor of ShareComp 2010 - a new and exciting way to stay up-to-date virtually and when it fits into your schedule! We are also excited about all of the calls we are getting from companies who want assistance on their new start. Whether updating old processes and procedures, doing a vendor analysis or cleaning up databases from years of neglect - equity departments are ready to get fit!

Happy New Year!! May all of you have a busy and fulfilling 2010!!

Marianne Snook, Principal
Stock & Option Solutions

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Free Webcast:

Opting for Outstanding Outsourcing:
Best Practices for Outsourced Stock Plan Success

February 24th, 2010

Click here to register.

Please join us for our next free webcast on Wednesday, February 24th at 11am Pacific Time, 2pm Eastern Time


More than a few have made the mistake of assuming "once I outsource, I won't have to worry about it!", only to be disappointed when expectations are not met. Fingers often point everywhere but to the real cause, which is at the initial assumption.

No matter how thorough and complete your vendor search, and regardless of how excellent your provider, the plain truth is that the success of an outsourced equity compensation plan is as reliant upon the internal processes and methods of issuing companies as it on the outsourced provider.

This session will complete the circle of outsourcing responsibility, and present a holistic approach to outsourcing, focusing on the challenges (and how to overcome them), as well as the benefits (and how to maximize them) that these types of relationships present to your organization. Burning questions will be answered about

  • What your team needs to succeed
  • How to set things up to best leverage the strengths of your provider
  • Successful partnership and communication with your outsourcer
  • Implementing control and reconciliation processes to ensure operation accuracy
  • Steps to take so that things don't get missed
This will be presented within a framework of unbiased and tested best practices, with plenty of time for Q&A to get you the information you need to know to make your program successful.


(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.)

Money Makes the World Go 'Round, Part III: Update on India FBT

Six months ago, Xtra focused on the challenges of administering equity awards in India under the Fringe Benefits Tax ("FBT") regime. Just as everyone started to feel somewhat comfortable with the "new" rules, the Central Board of Direct Taxes ("CBDT) released changes, effective April 1, 2009. Full guidance has still not been provided, but some clarifications were offered in late December 2009.

Under FBT, tax was payable by the employer on the taxable event: stock option exercise, ESPP purchase, and RSU vesting, but was calculated on the spread at vest. In addition to the difficulty of calculating the spread at vest for stock options with frequent vesting, companies that were not listed on an Indian stock exchange could not rely on their FMV on the non-Indian exchange, such as NASDAQ or NYSE. Instead, these companies had to obtain a valuation from a Category I Indian merchant banker registered with the Securities & Exchange Board of India ("SEBI").

Unfortunately, the merchant banker valuation requirement has not changed under the new rules, "Income Tax (13th Amendment) Rules 2009". For companies not listed on an Indian stock exchange, a merchant banker valuation must still be utilized to determine the taxable gain. What has changed is that the employer is no longer liable for FBT on the spread at vest. Instead, the employee will now be subject to income tax on the spread at the time of the taxable event and the employer must withhold and remit the tax to the tax authorities. Withholding should occur at the employee's marginal tax rate, with a maximum rate of 30.9%. A summary of the changes between the FBT regime and the 2009 Rules is provided in the table below.

Summary of Changes

  FBT 2009 Rules
Applicability Stock-settled awards Stock-settled and cash-settled awards
Liability Employer Employee (employer has withholding obligation)
Taxable Event Stock option exercise, Restricted Stock Vest, ESPP Purchase Stock option exercise, Restricted Stock Vest, ESPP Purchase
Taxable Amount Spread at vest Spread at taxable event
FMV Methodology for companies not listed on Indian exchanges Valuation to be provided by registered Merchant Banker Valuation to be provided by registered Merchant Banker
Tax Rate 33.99% Employee's marginal tax rate (maximum = 30.9%)

Companies offering equity awards in India should now do the following:
  1. Review any option exercises, RSU vests, and ESPP purchases that may have occurred since April 1, 2009 and determine the spread for each taxable event using the merchant banker valuation for the applicable date. As under FBT, the merchant banker valuation may be utilized for 180 days up to the date of the transaction.
  2. Determine if your company made quarterly FBT payments in 2009 and, if so, whether the amounts were sufficient to cover income tax that might now be payable.
  3. Determine whether income tax due can be collected from employees; for terminated employees, the company may have to pay the tax on behalf of the employee without the ability to collect the funds.
  4. Determine tax withholding methodology and ability to utilize employee's marginal tax rate.
  5. Consult tax advisor to determine methodology for allocation of income for mobile employees.
  6. Review and revise grant agreements, plan documents, as well as employee communications as needed. Employee communications should address the potential differences between the actual income received through a cashless exercise and the income calculated for tax purposes using the merchant banker valuation. The company will still need to communicate the merchant banker valuation to the employee as the employee is still responsible for reporting capital gains and losses.
While we are not quite back to the pre-FBT days of qualified stock option plans without an employer withholding requirement, the new rules should be easier for non-Indian listed companies to comply with.

Questions on this article or the India FBT in general? Questions with respect to your worldwide stock plans? Curious about our international service offerings? Email us. We love to talk India FBT.

Product Spotlight: SOS People Solutions - Temporary, Temp-to-Perm, and Outsourced Stock Plan Management Strategies

People Solutions seems like such a self-explanatory name that we don't often step back to detail ALL the ways our "People" are utilized by our clients.
  1. Temporary Staffing - The stock administrator just gave 2 weeks notice, there's an impending disability/maternity leave, vacation (yes, even stock admins can take time off - pass it on!), the new hire req finally go approved but help is needed NOW!!! These are all times when our People Solution can step in to help. We have consultants available at every level, and able to cover the full range of responsibilities of a equity compensation department, including overall stock plan management, senior administration tasks, and day-to-day processing…
  2. Big Projects - Simultaneous ESPP purchase and open enrollment, big RSU release, vesting of in-the-money options (maybe as a result of a tender offer), quarter-end, new plan rollouts, employee call centers around special events, accelerations…Whenever extra hands are needed, we've got them available.
  3. Remote Administration- This model is most popular with our clients who don't need a full-time administrator, but also need the expertise to handle stock admin. Our People typically VPN in to the client's email and stock admin software on a scheduled/regular basis. We handle participants' questions and activities; send daily/as-needed files to the broker; prepare reports. Basically, we become the client's offsite administrator. Whenever necessary, we can also arrange to meet your challenges onsite.
  4. Premiere Candidate Resourcing (PCR): Temp-to-Perm Placement - Remember that all important req signed in #1? We will assist in finding the right person for any organization. After working with the client to identify the skill set and other important criteria of their perfect candidate, we get to work. Utilizing a proprietary skills assessment survey, and a thorough interview process, we will narrow down the list of potential candidates to those who are best suited to our client's environment. Once we identify one or more perfect matches, the client determines who they want to work with. After a trial run, the client determines whether to hire the individual or look for a better match.
  5. Premiere Candidate Resourcing: Direct Placement - We will essentially go through the same steps as in the Temp-to-Perm model, but once the company has selected the appropriate candidate that person gets hired on immediately, without the trial run.
  6. Outsourcing (TEAM) - TEAM stands for "Total Equity Administration & Management", and is the best approach for companies who want to outsource some or all of the management of their stock plans while retaining full access to all of their equity data. TEAM is a flexible and completely customizable approach to providing the much needed expertise/experience to ensure that equity plans are managed efficiently, in line with industry best practices, and with full attention to compliance. Just as important, TEAM offers choice in database/software and brokerage services, allowing our clients to tailor a complete solution best-suited to their needs.
SOS TEAM Outsourcing: How we work with our clients

For more information, please feel free to contact us at, or visit the People Solutions page of our website.

ShareComp 2010

Have you taken advantage of FREE registration for the upcoming ShareComp 2010 conference, courtesy of SOS?

ShareComp 2010 is the only fully virtual conference for share-based compensation information, solutions and access to the industry's leading experts. The presentation and moderated chat topics were selected by a large panel of industry experts who focused on current issues and practical solutions. This event for stock plan professionals will be held on February 23, 2010.

As a founding sponsor, SOS is able to offer you a free registration. Register now using our sponsor pass "SOS" to secure your free attendance at this exciting, market-leading event. Feel free to share this sponsor pass with others within your company...And up to 16 hours of CEP credit will be available for attended sessions!

Register Here

(click image for video)

Dan Walter of Virtual Conference Partners ("VCP") is interviewed by Barrett Scott about ShareComp 2010

SOS Across Our Desk: Equity Compensation in the News...

Times, they are a-changing
Executive Compensation to make a comeback in 2010, but companies are getting creative in the measures they put in place to ensure accountability...conducting a risk assessment ...And the Valley takes a fresh look at it's old friend, the stock option...Corporate share buy-back programs accelerate

Option Backdating
How stock backdating investigations changed Silicon Valley...Red flags in the backdating cases...More on the Broadcom case.

Linking Pay to Performance
Market stock units--a better way to tie pay to performance?

New Proxy Regulations
SEC provides guidance, with a very good discussion of those changes here.

The IRS is stepping it up.

International Reporting Requirements
Requires (free) registration, but full of useful information on reporting requirements for companies with global stock plans.

Want to get these updates as we find them? Follow us on Twitter or become a fan on Facebook.

Read the latest SOS Press Release (which includes a video Q&A): "Stock & Option Solutions Launches a New Kind of Stock Plan Management Outsourcing Solution"

SOS Xposé

...tender tidbits about people and players in our industry...

Recovering and back to work! Sonia Sexton of Blue Coat Systems is back at work this week...normally, not a big deal, but Sonia had been the passenger in a car involved in a serious accident on the San Mateo bridge last month, and the return to normal IS a big deal. She was relieved to report that there were no fatalities, and we are very glad that she is going to be all right.

Arrivals... Angela Hammond (Ingersoll Rand) and John Hammond (Transcentive - Computershare) welcomed William John Hammond - "Will" on January 3rd. He arrived 3 weeks early because early January wasn't busy enough with year-end activity. 7 lbs, 11 ozs - everyone is doing wonderfully...Surprise! Barb Baksa (NASPP) has a new arrival to announce. Click here to see a picture of little Kinsey.

On the Move!... Pam Stetson and Jean Ulrich have taken positions with Monidee in the international firm's San Francisco office, which will be opening on February 1st. Pam has joined as the Senior Director of Client Development and Jean as the Director of Event Services...David Roberts has started a new position as Managing Director - Equity Plan Solutions, at Bank of America Merrill Lynch...Mark Shimomura, a well-known face in the industry for over a decade, as well as former SOSer, has taken a position with Computershare/Transcentive in their San Francisco office as Sr. Business Solutions Manager...SOS' Andrea Best has moved with her husband Brian back to her adopted home of Florida in search of more exciting presidential elections. She will maintain her responsibilities managing the People Solutions group here, and also is looking forward to completing her PhD this year...Congratulation and good luck to you all!

Speaking of higher education... Tweed and elbow patches are the order of the day for Jim Lecher of Radford Consulting. Jim has returned to his alma mater, Arcadia University, as a Professor teaching a course in derivatives. Good luck, Jim...

Players... The crescendo of global equity developments can be overwhelming. With the launch of Rutlen Associates' Gear-Up program, companies now have a way to filter those updates for what is meaningful to them. For more information, contact Carol Rutlen or Marlene Zabayan.
Happy New Year!

Happy Groundhog Day!

Laissez Les Bon Temps Roulez!

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 advisors. The preceding information does not necessarily represent the official views of Stock & Option Solutions, Inc. with respect to any of the issues addressed.
Stock & Option Solutions | (888)SOS-0199