Stock Options Most Common Equity Pay for Non-U.S. Employees

August 29, 2007 ( - Nonqualified stock options remain the most prevalent type of equity grant for employees based outside of the U.S.

However, Deloitte’s 2006 International Stock Plan Design and Administration Survey found there has been a 50% increase in the number of responding companies offering restricted stock/unit plans since 2003.

This is partly due to the Financial Accounting Standards Board’s (FASB) decision to require the expensing of stock compensation which led to 46% of respondents reducing their stock option awards and 48% of respondents granting more restricted stock or restricted stock units to non-U.S. employees, according to the report on survey results.

Nearly one-half of companies surveyed adjust their stock option grant sizes for employees outside the U.S., with relative wage level the most common criteria for adjustment. Additionally, Deloitte found 62% of respondents offer an employee stock purchase plan to employees outside the U.S., and the median participation by eligible non-U.S. employees is 15%.

Other survey findings, according to the report, include:

  • 66% of respondents do not take advantage of tax favorable treatment in any non-U.S. country where they have plan participants.
  • 89% of companies administer their stock plans for non-U.S.-based employees primarily from the U.S. Human resources is the department that most frequently participates in the administration of the plans, followed by the legal department.
  • 42% of companies do not recharge their stock plan costs to the local subsidiaries for any location. Of those that do recharge, the number that recharge the spread was very similar to the number that recharge the fair market value at grant.
  • A variety and combination of communication methods are used to communicate the stock plans, the three most prevalent being e-mail, intranet, and the outside administrator’s Web site. Nearly one-third of companies (29%) communicate in languages other than English and 60% of respondents do not communicate any tax information.
  • 37% of respondents review their compliance with tax and regulatory requirements at least annually; respondents used a variety of methods to keep updated on tax and regulatory changes including using external providers, internally through various sources, and relying on their local contacts. Ninety percent of respondents comply with data privacy laws.
  • 45% of companies distribute agreements electronically in all countries and 62% accept electronic signatures for those agreements.

The International Stock Plan Design and Administration Survey was developed jointly by the National Association of Stock Plan Professionals (NASPP) and Deloitte Tax LLP (Deloitte) and was administered by Deloitte from October to November 2006 . Members of NASPP and clients of Deloitte Touche Tohmatsu were invited to participate. The survey results were based on responses from 291 companies.

The full survey report is here .