Occasionally, I am asked if it is necessary for employees’ spouses to accept the equity awards granted to employees, in addition to the employees’ acceptance. In my experience, most companies don’t require this (it’s usually hard enough to get employees to accept their awards) but some companies do. Here’s why.
Technically, there's no legal requirement for consent from either the employee or his/her spouse, and, in fact, a small percentage of respondents (less than 10% in 2016) to the NASPP/Deloitte Consulting Domestic Stock Plan Design Survey indicate that they do not require even employees to consent to their awards.
But the majority of companies do require consent; they do so not because it is legally mandated but to protect the company in the event that there is a dispute over the terms of the award. If an award holder challenges the terms of the award at some point, the company is in a much better position legally if they can show that the award holder agreed to the terms of the award. There are many cases where having that signature has been a key factor in companies prevailing in disputes with employees, often high-stakes disputes. It's not a guarantee--for example, sometimes there are disputes as to what the language that everyone agreed to means--but a signature goes a long way towards protecting the company.
In community property states any compensation paid to married employees during the period of their marriage belongs equally to both the employee and his/her spouse (as I understand it—I am for sure not an expert in family law). When you grant an award to a married employee in a community property state, that award also belongs to the employee's spouse and the spouse might be able to argue that he/she has certain rights to the award. Thus, some companies want spouses to sign the agreement as well, as a further measure of protecting the company in the event of a dispute.
A company's position on this is likely dependent on several factors:
As I noted above, in my experience, spousal consent is the exception rather than the rule. But for some companies and in some cases, it might be appropriate.
5 Trends in Stock Plan Administration Staffing and Practices
Next week, Joseph Rapanotti of Deloitte Consulting and I will be presenting highlights from the NASPP/Deloitte Consulting 2020 Domestic Stock Plan Design survey during the webcast “Read More
Insider Trading: Would You Sell Your Career for $100,000?
I’ve followed the topic of insider trading over many seasons and SEC enforcement actions, and the one thing that I probably find most fascinating is the “who” becomes entangled...Read More
Implementing an Auto Exercise Program for Stock Options
Companies that grant stock options know that there are a few core challenges that have maintained their existence throughout the life span of these types of arrangements. Among them: how to handle ...Read More
Three SEC Updates to Keep an Eye on
For today’s blog entry, I discuss a few recent and upcoming securities law developments.
Last year, the SEC issu...Read More
Excel Tips to Change Your Life: Index/Match
We are excited to announce that Elizabeth Dodge of Equity Plan Solutions has agreed to author a series of occasional blog entries on Excel, accounting, and other stock plan administration&nb...Read More