Trends in Global Equity Incentives Prevalence and Practices

In today’s global economy, most companies have multinational workforces, and, for companies that offer equity compensation, this leads to multinational equity programs. In this blog, I highlight trends in global equity incentives that the NASPP and Deloitte Tax reported on in our 2024 Equity Incentives Design Survey.

Over 90% of respondents to the survey are headquartered in the United States, thus the trends I highlight are primarily applicable to US multinational public companies.  Overwhelmingly, we find that these companies extend equity globally: 97% of survey respondents with multinational employee populations report that they offer equity outside of their headquarters country.

Service-Based Full Value Awards Most Common Global Offering

Service-based full value awards are the most common equity vehicle that public companies offer both in their headquarters country (as noted previously, this is typically the United States for the survey respondents) and globally. Fully 98% of companies report that they offer service-based full value awards in their headquarters country and 91% offer these awards outside of their headquarters country.

This alignment doesn’t surprise me. Because most companies want to offer a cohesive worldwide benefit program, we find that they typically vary the equity vehicle offered to employees outside of their headquarters country only when absolutely necessary to comply with local laws.

Although 90% of respondents report that they grant performance awards to employees in their headquarters country, only 54% offer these awards outside of their headquarters country. This is likely because performance awards are almost exclusively granted to senior executives; many companies may not have employees at this rank outside of their headquarters country.

Service-based stock options and SARs are not commonly granted anywhere, with only 40% of companies reporting that they offer these awards in their headquarters country and only 29% offering them outside of their headquarters country.

Countries Where Equity Is Offered

For the most part, the countries where companies grant discretionary equity awards align with the countries where they're most likely to have employees. The top ten countries where respondents report that they have employees are Canada, the United Kingdom, Germany, Australia, France, India, the Netherlands, Singapore, and Italy, in that order.

For the most part, this list represents the countries where companies are most likely to offer equity awards, although the order may vary slightly when ranked by prevalence of equity grants. India is the only country in this list that is not among the top ten countries where companies offer discretionary equity awards.

The countries where companies most often do not grant equity despite having an employee population there are Russia, Indonesia, Saudi Arabia, and the Philippines. You might expect China to be on this list because the laws governing equity programs in China are so complex but 64% of companies that have employees in China report that they offer equity there.

Grant Size Adjustments by Country

One question companies that offer equity globally must grapple with is whether they should adjust equity award sizes based on local compensation levels or economic conditions. Just over half, or 54%, of companies report that they adjust the size of their service-based full value awards that are settled in stock, but practices here vary by country:

• 17% of respondents report that they make these adjustments in less than 25% of the countries where they have employees.
• 15% adjust grant sizes in 25% to 75% of the countries where they have employees.
• 22% adjust grant sizes in over 75% of the countries where they have employees.

The top three criteria that companies most commonly use to adjust grant sizes are:

• Pay practices by jurisdiction (60% of companies).
• Relative wage levels (51% of respondents).
• Job descriptions or levels (45% of respondents).

Terms and Conditions

Companies typically do not vary the terms and conditions of the equity awards that they offer to employees outside of their headquarters countries. For example, 77% of respondents said that they do not make any adjustments to the terms and conditions of service-based full value awards granted outside of their headquarters country. This practice aligns with the objective of providing a unified global benefit program.

The most common adjustment (14% of companies, in the case of service-based full value awards) is the form of settlement, for example using cash settlement instead of stock settlement. Where companies make this adjustment, it is likely to comply with local laws.

Tax-Qualified Plans

One of the most common tax-qualified plans offered by survey respondents is a Section 423 qualified ESPP; approximately 80% of companies that offer an ESPP in the United States report that their plan is tax-qualified.

Text preference is also common in Israel, where almost 60% of respondents report that they operate their RSUs within the framework of Section 102 of the Israeli tax ordinance.

Despite high tax rates in both France and the UK, few respondents report that they offer qualified plans in these countries. Only 25% of respondents offer an approved plan in the UK. This may be because the limits on the amount of equity you can offer under a UK-approved plan are too low to be of much benefit for most companies.

In France only 29% of respondents report that they offer a qualified plan for free shares/RSUs, This may be because France has reduced the benefit of tax qualification in recent years and also because French laws governing the taxation of qualified plans seem to change quite frequently—some companies may simply not want to hassle with this complexity.

Learn More

For more trends, check out the NASPP webinar Top Trends from the 2024 Equity Incentives Design Survey.