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 Administering employee equity plans can be a tricky business. Keeping up with complex and ever-

changing comp liance requirements while manag ing efficient processe s with limited resources can

be an overwhelming responsibility for anyone. And determining the resources you need to

administer your employee equity plan can be confusing as well, give n the wealth of options that

exist.

Decidin how much of our stock lan administration to outsource is a ma or undertakin . Some

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TO INSOURCE OROUTSOURCE?Four Steps to Gauge Your 

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Published on: November 28, 2011 | Solium

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companies like their staff to manage everything in-house using recordkeep ing software and a

broker partner. Others prefer to fully outsource the administrative tasks to a third party who provides

the recordkeeping system, handles the trading and offers knowledgeable stock plan experts to

manage the p rogram. The most suitable method for you dep ends on a number of factors – there's

no right or wrong answer. This white paper will guide you through a few points to consider when

making this assessment.

STEP 1 – ASSESS YOUR TECHNOLOGY, AND THEIRS

Because the factors in the de cision are large ly interdependent, determining what degree of 

outsourcing is right for you will not be a linear p rocess. But a good place to start your assessment

is with technology, which provides the foundation for a successful administration infrastructure. A

stock plan reco rdkeep ing system is essential for tracking various plan terms, pa rticipant activities,

demographic information (e.g., ID numbers, addresses and hire dates), grants and awards, and

other related d ata. The system also houses information about transactions, such as option

exercises , restricted s tock release s and a cquisitions from share purchase prog rams. Reports from

the sys tem are necessary for accurate financial reporting and accounting, and the compa ny can

also use the platform to track share-pool balances and behavioral trends.

You should address the following major questions when deciding on stock plan software:

Does the system have the functionality required to suppo rt your equity pla ns?

Most availab le programs will support standard equity vehicles, transactions and rep orts. If 

your plan has unique terms, such as market-b ased performance vesting, or if you want the

flexibility to generate fully customized real-time reports, you might need a more specialized

app lication. If you can't find a system to handle these requirements, you'll need to look for a

gap solution or build a manual workaround.

How does the software interact with other systems involved in the workflow? If you want to

connect the stock plan so ftware to your HR system, the broker's trading p latform, a participant

web portal or your payroll provider, think about what data needs to be exchanged and how

this will be accomplished. Integrating multiple technology p latforms enables da ta integrity and

efficient data movement while minimizing risk associated with human error.

Do you want to be resp onsible for maintaining the system? If you like having full control o f the

database and don't mind handling all the data entry, storing the system a t your site may be

best. But if you want to avoid licensing issues a nd software upgrades and simply want to run

reports from the system, a third-party outsourcer may be optimal.

How much time will the proposed technology save you? Look at how the system can

automate tasks that you would otherwise perform manually. Make sure to consider not just the

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core reco rdkeep ing platform, but connected interfaces (e.g., participant web portal) that could

save a great deal of your time.

Will the system g row with your company? As your company matures a nd the characteristics

of your employee base change, your equity plan will evolve. The system should be

adequately flexible and robust to support evolution. Ideally, you should be able to move from

in-house administration to outsourcing on the same system.

Your answers to these q uestions may help you narrow down the wealth of software choices. Some

systems are a vailable as part of a software- only, in-house administration solution while others are

only offered in an outsourcing relationship with that particular provider. Once you know how you

want to manage your technology platform, you are one step closer to finding the right administration

structure for your company.

Bottom line – Understand what you need a recordkeeping system to do and

how you want to interact with it.

STEP 2 – ASSESS YOUR HUMAN CAPITAL

No matter what structure you choo se, the peop le manag ing your equity plans must be

knowledgeable. With a software-only, in-house arrangement, you'll need people with expertise to

handle a wide variety of tasks.

If you are considering this route, ask yourself the following ques tions:

Who will be responsible for manag ing each function?

 Are these employees dedicated to stock plan administration or do their core responsibilities

lay elsewhere, such as payroll or HR?

Do you have enough people to handle the inevitable volume of work that comes at year-end

or during a stock price spike? What about coverage for absences? If you have one personresponsible for stock plan administration, who audits his or her work?

Does your team have suffi ciently broad knowledge to handle the demands of your plan and

the needs o f your participants? For examp le, if you g rant internationally, how well do you

understand e quity plan requirements in the countries where you op erate?

If you have adequate internal stock plan e xpertise, in-house administration may be viable . If not, an

outsourcing relationship could be benefi cial, as you ca n draw on the provider's staff to provide

critical expertise and continuous, scalable coverage regardless of high volume and employee

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turnover.

Bottom line – Your capacity to handle a software-only model depends on the

number of peop le yo u have staffed to the administration of your plan – and their 

level of expertise.

STEP 3 – ASSESS YOUR COMFORT WITH RISK

Employee equity plans come with a great deal of risk, as they are subject to corporate governance

practices and various securities, tax and accounting regulations. Your employee equity plan will

also affect your financial reporting and involve an accounting expe nse for your company. When you

work with a software- only solution, all aspe cts of managing your equity plans a re totally up to you,

including risk management.

Three things can help minimize exposure to risk:

Internal expertise – Those responsible for stock plan administration should understand

regulatory compliance requirements and be able to provide sound counsel when challenging

situations arise. You should know how you'll keep up with ever- changing rules and practices

and understand how they a ffect your equity plan.

 Automation – The less your equity data is touched by human hands, the sa fer it is. Think

carefully about how equity data flows through the cycle and across multiple platforms, and

find a solution that allows as much automation as poss ible.

Process design – Well-crafted, standardized processes with audit controls and consistency

of application are also key to a risk mitigation strategy

Fully outsourcing your stock p lan administration can offer peace of mind. You'll ga in access to

stock plan professionals with extensive expertise, sophisticated technology tools to move and

process large amounts of data, and systems built to streamline tasks. And many service providers

have documented practices in place to offset risk for themselves and their clients, such as aStatement on Standards for Attestation Engagements (SSAE) No. 16 (formerly known as a SAS 70 ).

 A SSAE 16 p rovides significant information about the provider's business controls and can help

mitigate your risk.

Bottom line – Expertise, automation and intelligent

process design mean less risk.

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STEP 4 – ASSESS YOUR PARTICIPANTS

Ultimately your equity plan e xists for your participants, who are most likely yo ur employees. If the

program is too confusing or pa rticipants can't get answers easily, you may find the plan is not

achieving its purpose as a retention, reward and incentive tool. As you assess your participants,

think of the level of support you want to offer them. Are your people savvy when it comes to

employee equity programs or do they need a bit more assistance? If they need significant support,

are you able to offer it? Fielding questions and performing transactions for employees can be a

time-consuming responsibility, especially for large, high-needs populations or on days when the

share price jumps.

The following are two popular methods for reaching participants:

 A web po rtal where p articipants can log in anytime, view their outstanding equity grants, enter 

transaction requests and access useful documents

 A call center that offers knowledgeable representatives, extensive hours and suppo rt in

multiple time zones and languages

Outsourcers often provide these resources at no additional cost, providing an easy way for your 

employees to ask questions and take advantage of their equity awards. Because the outsourcer 

handles ad ministration for you, their web portal and ca ll center will likely be able to support more

than just basic transactional inquiries. This is a g reat way to extend your capacity if you don't have

the time or resources internally to manag e this respo nsibility.

Bottom line – Know the level of support you want to offer your participants and

decide who will provide it.

FINAL THOUGHTS

Deciding how much of your equity plan administration to outsource will likely provoke valuable

discussions about your organization's culture and values – as well as our equity plan's strategic

objectives. The only right solution is the one that's right for your unique needs. No matter where

your needle sits on the ga uge, Solium Capital offers a solution for you. We have a range of 

products and services to help you achieve your goals, from software-only, broker-agnostic

solutions to full-service a rrangements that include brokerage services and pa rticipant interfaces.

ABOUT SOLIUM

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Solium is a leading global provider of web-based stock plan administration technology and

services. Shareworks®, our industry-leading software, provides unrivaled, comprehensive

regulatory and financial reporting capabilities, helping companies automate and manage

their stock op tion and purchase plans.

Since our inception in 1999 , we have been known as industry pioneers, a lways striving to

change the status quo a nd challenge conventional methods. We take great pride in be ing

leaders of change and delivering the most innovative stock plan administration experience

possib le for finance and HR professionals, plan ad ministrators and participants. Solium has

offices in Canada and the United States.

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