Stock Plan Administration: The Intersection of Finance, Legal & HR

March 06, 2024

Stock Plan Administration is an interesting profession, it’s one we’ve all found ourselves in for one reason or another and in fact there’s a running joke that I know we’ve all heard at some point in our careers, “No one grows up wanting to be an equity professional”, and it’s true!

If I would have told my younger self that I would have ended up focusing my career on equity administration, I’m not sure he would have any fewer questions than my friends from college do whenever the topic is broached. So, with that said, what actually is a stock plan administrator?

What is a Stock Plan Admin?

A stock plan administrator from a high-level overview is someone who administers the equity programs of a company, but it is so much more than that. Equity in itself very much lies at the crossroads between the finance, legal & HR departments of a company, and stock plan administrators need to have a firm grasp of all three areas in order to function efficiently within their roles.

As I’m sure you can tell, the level of understanding needed to be an effective stock plan admin is quite complicated, especially when you take into account how this field tends to evolve quite quickly in some of the areas we oversee and for this reason, continuing education isn’t a nice to have, it’s a must have.

The Fundamentals

With all the information needed to be an effective admin, those newer to the profession naturally tend to get quite overwhelmed when first starting out, which is why we have our “Stock Plan Fundamentals” course to help even the playing field for newer equity professionals. The course was designed to help build a foundation of knowledge that can be continually built upon in order to stay current within our field, including information about how stock plan admins function in relation to the three departments mentioned earlier.

Finance

The finance department in my experience is usually where most admins tend to reside within their companies, not always, but just in my experience I’ve noticed that most of us tend to come from a financial background and so naturally we tend to fall under that side of the org chart.

In relation to finance the two broadest areas we are responsible for, or are responsible for assisting with, are in relation to taxation and accounting.

Taxation

When it comes to taxation, we need to be able to differentiate between the various equity award types such as ISOs, NSOs, and RSUs, and understand the unique tax implications of each, including what situations trigger a taxable event.

We are responsible for calculating and withholding taxes accurately. Issuing and filling the necessary tax forms (e.g., Form W-2, Form 3921, Form 3922), and ensuring compliance with both local and international tax laws while also playing a key role when educating employees about their tax obligations, providing guidance on tax planning without offering personal tax advice.

Accounting

Now for accounting, to touch more on my experience, if we were taking a poll on the most frequent professions admins come from before settling in our field, I would say accountant would be at the top of that list.

As admins we are integral to the accounting process for equity awards, ensuring compliance with relevant standards like FASB ASC Topic 718 by accurately recording and reporting stock compensation costs. We monitor and update the valuation of equity awards and have a deep understanding of the impact that stock options, RSUs, and other forms of equity compensation may have on our company's financial statements, including earnings, equity, and expenses.

We’re also typically involved in coordinating with our finance teams to incorporate equity compensation into financial planning, forecasts, and reporting, to ensure that equity transactions are reflected correctly in corporate financial records.

For this reason, it’s important that we stay informed about changes in accounting standards and practices, otherwise we run the risk of inaccuracy and non-compliance.

Legal

Legal is the second area we’re going to discuss. Most admins I know don’t fall directly under this side of their organization, but we all have responsibilities that bring us into that realm throughout the daily course of business.

When it comes to legal, our roles require us to navigate through a sea of regulations and compliance requirements. We need to have a deep understanding of securities laws as well as the nuances of SEC filings under Section 16. There are severe repercussions for being non compliant and it falls on us to make sure that we are maintaining transparency by ensuring that form 3 and form 4 filings are executed meticulously and that insider transactions have been accurately documented.

HR & Employee Relations

Last but certainly not least, we have human resources and employee relations, where the human element of equity compensation comes to the forefront. Here, our role centers around the softer skills of communication and empathy and in my experience, is the second most common area our profession resides within after finance.

As stock plan administrators, we are essentially the face of our equity programs to the workforce. We demystify the complexity of stock options and RSUs, breaking down barriers of misunderstanding with clarity and confidence. Our interactions may range from one-on-one consultations to broad-based educational seminars, all with the aim of fostering an inclusive and informed company culture where every employee feels valued and invested.

Employee education is a key facet of any equity program and thus falls under our jurisdiction more often that naught. Equity is and will most likely continue to be a very niched field and in order for our employees to feel invested in our programs and to maintain enrollment, it's up to us to ensure they understand the benefits of equity and how it can assist them with their financial goals.

Conclusion

At the end of the day, we as stock plan administrators embody a unique blend of financial acumen, legal insight, and human resource prowess. We ensure that equity programs not only contribute to the company’s mission but also comply with legal mandates and resonate with the people who make the company what it is. No, we may not have grown up dreaming of this career path, but the critical role we play in the convergence of finance, legal, and HR makes us an indispensable asset to any organization.

So the next time you have a conversation with an old friend and they ask what you do, lead with that!

By Jason Mann
Content Director

NASPP