EUROPEANCHAPTER

The Investment Association (IA) has released updated remuneration principles, offering greater flexibility for UK-listed companies to structure executive pay in ways that attract and retain top talent in a competitive global market. Key changes include relaxed dilution limits, with the 5% restriction on discretionary share plans removed, and allowances for evergreen employee share plans that no longer require shareholder approval every 10 years. While these updates provide companies with more discretion, they must still align with existing shareholder-approved remuneration policies and plan rules, ensuring compliance while leveraging the new flexibility to meet strategic objectives.

Effective communication is essential to the success of equity compensation programs. To maximize employee understanding and engagement, companies need to offer clear, accessible, and consistent messaging. During a recent webcast, experts Dina Thiessen and Bonnie Grassman from insightsoftware, along with Katie Griffis from Nelnet[KS1] , shared valuable strategies for enhancing communication efforts through technology, data insights, and proven engagement tactics.

Clarity in messaging

To communicate the value of equity compensation, it’s crucial to keep messaging clear and tailored to employees’ needs. Simplifying complex concepts helps employees understand not just the mechanics of equity plans, but how they fit into their overall compensation.

• Simplify language: Use plain language to explain equity plans and avoid overwhelming employees with jargon. Visual aids, such as infographics and short videos, can be useful tools to simplify information.

Comprehensive employee education

Educating employees about their equity compensation is key to increasing engagement. From stock options to RSUs, employees need clear explanations of award types, vesting schedules, and tax implications. Educated employees are more likely to value and participate in equity programs.

• Offer live sessions: Webinars and Q&A sessions allow employees to ask questions and gain in-depth knowledge about their equity plans.

Leveraging technology for clearer communication

Adopting technology platforms, such as Certent Equity Management from insightsoftware, can significantly improve communication by providing employees with centralized, real-time access to their equity details. Certent simplifies equity plan management, offering transparency and reducing administrative burdens.

• Streamline processes: By transitioning from manual processes to automated systems, Certent allows HR teams to focus on high-priority tasks while employees gain self-service access to key information.
• Enhanced transparency: Certent’s platform provides robust tax reporting and compliance tools, ensuring employees understand the tax implications of their awards.

Katie noted that since adopting Certent, Nelnet has seen a reduction in employee questions because the information is readily available, reducing confusion and empowering employees to make informed decisions.

Tailored communication for greater engagement

Personalized communication helps build trust and strengthens employee engagement with equity compensation programs. Tailoring messages based on factors such as tenure, role, and award type ensures that employees feel valued and that their specific needs are addressed.

• Segment employees: Use data analytics to target specific employee groups with relevant communications about equity compensation.
• Consistency across teams: HR, finance, and legal departments should collaborate to ensure messaging is consistent and accurate.
• Leadership involvement: Having executives share personal stories or experiences can build trust and demonstrate the company’s commitment to equity compensation.

Dina emphasized the importance of personalization to foster deeper engagement and satisfaction, which leads to higher participation rates.

Ongoing communication and education

Communication about equity compensation should not be a one-time event. Continuous communication helps employees stay informed and engaged. Regular updates about key dates, plan changes, and new opportunities ensure employees understand the evolving value of their awards.

• Regular updates: Send frequent reminders about key events such as vesting or expiration dates.
• Use multiple channels: Ensure resources like FAQs, award summaries, and educational tools are easily accessible via internal portals and emails.
• Offer educational tools: Workshops and webinars help employees better understand equity compensation’s full value.

Bonnie recommended using feedback mechanisms, such as surveys, to gauge the effectiveness of communication efforts. Tracking participation and collecting feedback can help refine communication strategies.

Data-driven insights for strategy optimization

Using data analytics tools, such as those provided by Certent, allows companies to evaluate the effectiveness of their communication strategies. Certent’s reporting tools offer insights into trends and gaps in employee participation, enabling HR teams to adjust messaging and target under-engaged groups.

• Advanced reporting: Certent’s advanced reporting features track engagement, helping HR teams understand employee behavior and optimize communication strategies.
• Actionable insights: By identifying trends and gaps in participation, companies can adjust their communication efforts to target specific groups and improve overall engagement.

Enhancing the user experience

A seamless user experience increases the likelihood that employees will engage with their equity compensation plans. Certent’s mobile-friendly, user-centric interface allows employees to track their awards, stay informed about key dates, and make the most of their benefits.

• Promote self-service: Encourage employees to access their equity details via Certent’s platform, empowering them to manage their awards independently.
• Mobile accessibility: Certent’s platform is designed to be mobile-friendly, allowing employees to track their equity plans anytime, anywhere.

THE POWER OF EQUITY COMMUNICATION

To maximize the success of equity compensation programs, companies must focus on clear, personalized communication and leverage technology to ensure transparency and engagement. 

Platforms like Certent Equity Management from insightsoftware simplify communication and help organizations track participation trends, enabling HR teams to make data-driven decisions. By prioritizing education, transparency, and a seamless user experience, companies can increase employee satisfaction and participation, ultimately fostering a more engaged and informed workforce.

For more information or to arrange a demo of Certent Equity Management, contact Dina or Bonnie directly.

Watch a recording of the webcast on GEOlearn: HERE

Luxury goods brand LVMH has launched "LVMH Shares," an employee share plan covering 70% of its global workforce across 11 locations in Europe, North America, and Asia. Eligible employees will receive a matching contribution of shares and a 20% discount on the share subscription price, which equals the opening price of LVMH shares on the Euronext market; the scheme involves 200,000 newly issued shares available from 24 October to 13 November. The initiative aims to involve all employees in the group's development and show appreciation for their commitment, emphasizing LVMH's belief that its employees make all the difference, as highlighted by Chantal Gaemperle, group executive vice president of human resources and synergies.

The UK government is considering converting the Post Office into an employee-owned company through an Employee Ownership Trust (EOT), similar to the John Lewis model, which would give employees a stake in the business and a say in its operations. The move comes as EOTs have become more popular, with calls for ownership reform at the Post Office intensifying due to recent governance issues and the Horizon IT scandal. While EOTs offer benefits like profit-sharing and increased employee influence, union representatives emphasize that governance changes are essential for the model’s success at the Post Office, advocating for a cooperative approach with greater accountability.

LVMH has launched "LVMH Shares," a new international employee shareholding plan targeting 70% of its workforce across 11 regions in Europe, North America, and Asia, providing preferential subscription terms to enhance employee involvement in the Group's growth. The initiative reflects LVMH's commitment to its values of innovation, excellence, and long-term partnership with employees, highlighting the crucial role of its workforce. Employees can subscribe to shares at a 20% discount during the subscription period from October 24 to November 13, 2024, with securities delivery scheduled for December 18, 2024, and shares to be listed on Euronext Paris.

Enhancing your global equity compensation strategy requires a deep dive into how participants across the world perceive and engage with these programs.

During a webinar held on 19 September 2024, Emily Cervino and Sarah Francis from Fidelity explored global perspectives, delving into their research that unveiled unique characteristics of equity compensation participants from Canada, China, Germany, India, the UK, and the US.

The session also shed light on how factors such as age and gender influence perceptions, offering invaluable insights into satisfaction, confidence, and educational needs.

In today’s competitive landscape, understanding these nuances is crucial for tailoring strategies that resonate globally, ensuring your equity compensation plans are both effective and impactful.

The rising importance of equity compensation

Equity compensation is a cornerstone of employee satisfaction and retention worldwide. Research indicates that 6 out of 10 companies are expanding eligibility for equity awards, with more than half increasing the value of these awards. As companies expand globally, the need to tailor these plans to meet regional differences becomes increasingly important.

Multinational organizations, some operating across more than 50 countries, must adjust for varying local requirements and cultural contexts to ensure their equity plans succeed.

Regional perceptions and behaviors

The webinar underscored how employees in different countries engage with equity compensation in distinct ways:

• Canada: Canadian participants are highly engaged, with 50% having sought professional financial advice, leading to higher confidence. About 68% plan to use stock plan assets for long-term goals like retirement.
• China and India: In these emerging markets, many participants are first-time stock owners, emphasizing the need for education on financial literacy and the long-term benefits of stock ownership.
• Germany: German participants have strong financial literacy but lower confidence in decision-making due to concerns over stock price volatility, underscoring the need for more structured educational resources.
• UK: Nearly half of UK participants are first-time stock owners with lower confidence, though satisfaction with Employee Stock Purchase Plans (ESPPs) is high due to payroll deductions and discounts. More education could address the knowledge gap.
• United States: In the US, a gap exists between intentions and actions—many plan to use equity compensation for retirement, but few follow through. Clear communication about the long-term benefits can help close this gap.
• India: Indian employees are highly engaged, often seeing equity programs as a primary source of retirement savings. Despite regulatory challenges, participation remains strong, reflecting broad enthusiasm for equity plans.

Actionable insights for a global strategy

Global equity compensation strategies cannot follow a one-size-fits-all approach. To ensure success, companies must adapt their programs to suit the specific needs of different regions. Key recommendations from the webinar include:

• Localized education: Offering region-specific resources and financial literacy tools empowers employees to make more informed decisions, especially in regions where professional advice is less accessible.
• Cultural relevance: Aligning equity strategies with local cultural values ensures better engagement. While long-term financial planning might resonate with Canadian employees, other regions may have more immediate financial concerns.
• Ongoing assessment: Continuously evaluating the performance of equity plans by region helps identify areas for improvement and adaptation, ensuring that the plans meet the evolving needs of the workforce.

In conclusion, tailoring equity compensation strategies to the specific needs of different regions is essential for boosting employee engagement and satisfaction. By providing localized education, understanding cultural differences, and regularly assessing plan effectiveness, companies can create compelling global equity programs that truly resonate with their diverse workforces.

This article is sponsored by Fidelity, a leader in helping organizations maximize the value of their global equity compensation strategies.

Contact Emily or Sarah directly for more information.

View a recording of the webinar on GEOlearn HERE.

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GEO and Fidelity are not affiliated.
Fidelity data as of March 2023.

British digital bank Monzo recently saw employees sell shares to investors, including Singapore's sovereign wealth fund, in a transaction valuing the company at £4.5 billion ($5.9 billion). This follows a March funding round that valued Monzo at £4 billion, marking continued investor confidence as the digital bank reports its first full-year profit and plans expansion in Europe and the U.S. This secondary sale aligns with a broader recovery in European fintech valuations, as seen with Revolut's $45 billion valuation in August.