Transcript: Successfully Managing Your Global Executives
US executives are generally pretty well versed in Rule 144 filings, Forms 3, 4 and 5, 10b5-1 plans and preclearance procedures. But what about your executives outside the US? This panel will propose a start-to-finish approach, from crafting an equity plan that works for your C-suite (both in the US and globally) to addressing unique challenges with administration, automated trading plans, and reporting.
Featured panelists:
- Justin James, VP Executive Services, Solium
- Robert G. Marshall, II, Partner, Jones Day
- Jason Newman, CFP, First Vice President - Financial Advisor, RBC Wealth Management - USA
- Overview
- Plan Design Considerations
- Securities Laws, Exchange Controls & Other Considerations
- U.S. Regulatory Requirements
- Foreign Account Tax Compliance Act (FATCA)
- Administrative Considerations
Kathleen Cleary, Education Director, NASPP: Good afternoon, everyone. Welcome to our webcast, "Successfully Managing Your Global Executives in a Few Easy Steps." Today, we'll discuss a start-to-finish approach, from crafting your plans, to addressing challenges with administration, automated trading plans and required reporting as well.
My name is Kathleen Cleary and I'm the Education Director for the NASPP. I'm happy to welcome our expert panel, Justin James, VP of Executive Services for Solium; Robert Marshall, Partner at Jones Day; and Jason Newman, First Vice President and Financial Advisor for RBC Wealth Management USA.
The slide presentation for this webcast is posted on Naspp.com, and we'll post the audio archive of today's program immediately following the conclusion of this live session. A transcript will be posted on Naspp.com in about two weeks.
Justin, do you want to get us started on the material for today?
Overview
Justin James, VP Executive Services, Solium: Sure. Thanks, everybody, for joining us today. As Kathleen had mentioned, the topic here is "Successfully Managing Your Global Executives in a Few Easy Steps." As you can see from the agenda, we are going to talk about global considerations for U.S. executives, plan design, obviously some regulatory requirements, trading plans as well as some global considerations to include FATCA implications.
So, with that, I will pass it over to Robert and let you get started.
Robert Marshall, II, Partner, Jones Day: Thanks, Justin. One of the issues that often comes up with global executives is how to provide them with bonus and equity programs that are really desirable and beneficial. In the U.S., these programs are usually well established, but often less so in other countries. One of the choices—and where a lot of companies default initially—is to try and replicate the U.S. programs. The issue we see is that this isn't a perfect solution for executives. There are various compliance requirements and burdens that come up outside the U.S., and especially if you have only one or two local executives, sometimes, the burden or the cost just outweighs the benefit.
A second sort of "big picture" issue that we see is when the executive transfers for a relatively short period of time—let's say they are being transferred for one or two years. In these cases, there is often a stronger desire to continue with the U.S. programs. Beyond the compliance concerns, one issue to deal with is the executive's tax situation. This is one we will touch on a few different times during our discussion today. The big picture concern here is that, often, when you have a global executive, they can be subject to tax in two countries. This comes up most often in the case of someone who is a U.S. citizen or green card holder who has transferred to another location. You want to make sure that you don't end up with an executive with very onerous tax consequences and something you could have prevented on the front end. This is something we will discuss in a little more detail in a few minutes.
Now, when deciding on an appropriate program for global executives, there are a few considerations that apply pretty much universally to all companies thinking about these types of programs. The first one of these is really your plan document flexibility. If you decide to offer equity awards, does your plan document allow for variations by country? For cash programs, this is really less of a concern. But you do want to make sure that any deviations, whether they would be for favorable tax treatment or just to meet local compliance requirements, whether it's securities or exchange controls, that you can make some of these changes so that the program will be easier to administer and more beneficial to the executives as well.
After that, we will discuss some various types of awards that we see that are very common, those that are most prevalent with executives. This can be a little bit different than what you normally see with broad-based employee grants or awards, due to the nature of the population itself.
For general tax considerations, how will the executive be taxed in a particular country? There is that second overlay in terms of the executive's specific tax situation. Oftentimes, that can impact the result—something that looks like a very favorable or beneficial award can really be scuttled by the executive's personal tax situation. It can be something that is going to be such a great tax benefit for everybody, but at the end of the day, it isn't for some. And we will talk about that a little bit.
I think these are pretty common—everyone may already be familiar with them. And that's securities laws, exchange controls and some of the employment law considerations that apply when you have an executive working in an international country. Some of the big picture rules are just a little bit different than they are in the U.S. and that is something to keep in mind when you have an executive who is being sent to another location for a short period of time and just how well that plays out.
Plan Design Considerations
Marshall: Now, moving over to slide four, there are a few plan design considerations that do apply and additional documentation concerns when you are dealing with a global executive. In terms of giving them the award documentation itself, you do have the requirement that it meets with your plan document. How flexible is that and what can you do in terms of deviations to make it a more successful program?
Once you determine that your plan document is flexible enough to make the awards with the deviations you want to make, the next thing to look at is whether or not you've got the authority to adopt country-specific sub-plans and terms. This can be very helpful if you want to deviate from a U.S. grant practice, to receive favorable tax treatment and possibly avoid some local law compliance concerns to really cut down on your administration.
One step beyond that, I think most companies are very familiar with approving different grant resolutions for the U.S. population. Most companies are fairly standard these days in terms of how they document that. They've got an established process set up and that process generally will hold true for any grants to global executives.
One thing to keep in mind is that the documentation will often be quite a bit more substantial. Whereas the U.S. grant documentation is fairly streamlined, for the global executive, there will often be deviations for items that need to be considered as material changes to the award and recognized by the subcommittee or the administrator plan.
Similar to this, in terms of the documentation that actually will go to the executives, there are a couple of things to keep in mind. The first one is that when you give them the grant document, just using your U.S. grant document typically won't suffice. U.S. grant documents are a great place to start and can often be used as the base document. But, there could be some items that need to be tailored specifically for other countries to cover local country laws and items that wouldn't necessarily apply to executives in the U.S.
Similar to this, I think most companies now are very comfortable using certain online brokerage systems for their award documentation and acceptance of awards. One thing to keep in mind with regard to the global executive is—will that electronic acceptance work outside the U.S.? I think most countries are now pretty comfortable with that, and we do see most companies using that worldwide. But there are still a few wrinkles that we are taking note of and it is important to run through these things before you have a problem on the back end. So, you want to consider it before actually making the grant, and make sure it will work. Then, if you have a dispute or issue a few years down the road, you want to make sure you are covered and it is valid in that country.
The final point is that once you go through all these steps to get the program to your global executive, it is really important to keep in mind and establish the resources for maintaining compliance. Local laws do change. If you have an executive who is just being transferred to another country or they reside in another country—not a short-term executive—an option could potentially have a term of 10 years. When these changes occur, you want to make sure you stay on top of compliance. Be sure you've got the resources internally to track changes and stay compliant. One of the big items we see that can be a real issue is if you start out compliant then things change, and you don't stay current, this can lead to huge problems at the end of the day.
The one thing, I think, everyone is really concerned about with their executive population, is to make sure that they don't have a big problem when the awards settle. Whether it's a tax problem or a legal problem, you want to transfer clear awards to them as much as you can. And recognizing that there is going to be additional administration for these executive's awards outside the U.S., it's important to know that from the beginning.
Now, turning over to page five, once you determine that you do have the flexibility to make these grants to global executives, you can basically tailor the documentation and take the steps you need to in terms of the additional administration, there are few items to consider with award types. There are different alternatives that we see quite a bit with regard to global executive population.
The first is cash-based awards. These tend to be less popular with global executives, except for the very highest level of executives. One thing to keep in mind—and we will get back to this in a few minutes—is that cash awards do play a very valid role in terms of avoiding compliance requirements. If you go into a country that is going to be too onerous for equity grants, always keep in the back of your mind that you can generally default back to a cash award and you won't have to deal with a lot of compliance requirements. That can be very helpful if you just have one or two executives in a country and the compliance is going to be too onerous to make equity grants practical.
The second award type that we see—and this is common with executives—is performance awards. The benefit here is to try and have a pay-for-performance strategy. These can be cash awards or equity awards. One example that is currently very common is RSUs with performance vesting or even achievement tied to the relative performance of your competitors. They could be tied to a stock market index or just something that basically provides a pay-for-performance culture. It's very popular and we have seen a huge upswing in this type of award for executives in the last three or four years.
Another alternative that is very popular with executives is awards that have a deferral feature. The reason is that a lot of times, the executive may not have the immediate need for the income today and they would rather recognize the income in a future period. The thing to keep in mind with U.S. executives that are being transferred, if you are a citizen or a green card holder, you will be subject to tax in the U.S. when you recognize income. Please keep in mind that you need to deal with the foreign tax considerations, just like you do when they are in the U.S. That is sort of a trap for the unwary and we have seen various issues come up when people just aren't considering it, when they are looking at the local requirements with sort of blinders on. It can be something that can be very costly for the executive at the end of the day and you want to avoid that as much as possible.
The other alternative we see with executives that we don't typically see in broad-based programs is, oftentimes, companies will offer a choice program. Under these choice programs, the executive is able to state their desire for the type of award they want to receive; whether it is going to be a cash bonus, a stock option grant, or an RSU grant.
Outside the U.S., these programs just don't work very well in a lot of countries. The primary concern, depending on how the program is structured, is you want to make sure the executive doesn't have an immediate tax impact just by having that choice. Always to look into these potential issues well before you offer a choice program. If executives are taxed before they even receive the benefit of the award, it can be very problematic because everyone wants to delay taxes or avoid them as much as they can.
Now, in terms of the equity awards themselves, if a company decides to steer clear of a straight cash-based award, and wants to grant equity awards, options do remain very popular with executives. I think one of the rationales for this, when compared to a broad-based population, is that oftentimes the executives can afford to pay the exercise price and actually hold the shares. For broad-based programs, what you will see outside the U.S. is that very rarely happens. From various studies that I have seen, 97 to 98 percent of non-U.S. employees don't exercise and hold. With your executive population, you won't necessarily see that same behavior. You will see them actually hold the shares at a much greater level. RSUs, of course, are still very popular. Restricted stock really isn't that great of a choice outside the U.S. There are some countries where restricted stock is still taxed on grant rather than vesting. It has actually gotten a little bit better the last five or six years, but something to keep in mind. And if you do want to grant restricted stock, that should definitely be looked into prior to making the grant itself.
The final point in terms of the award alternatives to keep in mind is that various countries have local programs that can provide benefits—usually on the tax side—to the executives. Tax qualified regimes have favorable taxation and can have favorable social insurance implications as well. But they typically have some additional administrative burdens that will apply to the company in terms of tracking.
The real takeaway on this point is that you really need to consider the executive's U.S. tax status. If you have an executive who is taxed in the U.S. and also in the local country, you want to make sure you don't have a mismatch in timing in terms of the taxable event. The concern here is that you could have the executive basically paying tax in two countries and they may not be able to get the credit for the taxes paid. That would be one of those items that would come up on the back end and the executive would be less than happy about the award. With some of the tax rates and social insurances rates, the combined taxable amount can really just dwarf the award and make it so it has almost no value to the executive.
Now, moving to slide six, once the preliminary award type is chosen for the executive, there are a few items that should be considered with regard to your company's culture. This varies quite a bit with different companies, but some consider it very desirable to be consistent with their U.S. practices. In other companies, it's not as big of a concern. What they often try to do is make sure the executives of the same level have a similar benefit program. That does vary a little bit, and you do have some of these local country requirements that may make things a bit different or it can be more favorable in one country than another. But, a lot of companies strive to be consistent, even though it is not always possible.
Another item to look into is whether or not there is already a local country practice. Is there something that they are granting to the broad-based employees that they want to carry over to the executives? That depends, in terms of what companies consider, on whether or not it is important to them. And then, also consider the compliance and administration impact. If you have something that you are putting in place for a few executives and the administrative concerns for the company are just onerous, it may not make sense.
I think the final point here with the big picture issues is where the executive is going to be located when they vest or exercise any award. One of the things we see with local executives is that they tend to stay one to two years in one country and, then, they move on to another country to get experience there. If you use a tax-qualified plan, and go through all the administrative steps to put this in place, they may leave before they ever receive the benefit. You want to look into what the requirements are and what will be the ramifications if the executives move on again. It can be a situation where you end up going through a lot of work and then there is really no additional value to the executive if they plan to move on. Oftentimes, you won't know ahead of time. So, it's just one of those things where you try and do the best you can and consider, if you do have someone who is basically moving every one to two years.
Securities Laws, Exchange Controls & Other Considerations
Marshall: In terms of the award type, when you are going to be making the offer in that local country, there are a few items to keep in mind. The first one of these is securities laws. Are there any compliance concerns that need to be dealt with locally? Do we need to make a securities law filing? There may be a very specific disclosure document that needs to be given to the executives. There are various types of compliance in a number of countries—one could be a full-blown prospectus. We don't see this too often outside the U.S., but it does depend a little bit on the award terms. If you need to get a full-blown prospectus, it can really be a costly undertaking. Something to consider in advance, especially if you've just got a very small executive population in that country.
The second type of compliance we see fairly commonly is share registration, and it is similar to filing an S-8 in the U.S. You register the number of shares and pay a fee. There are a number of countries that have a very similar system as we do in the U.S. One example is the Philippines, where you have to register a specific number of shares and pay the fee. It's very similar.
The third type of compliance we see on the international side is disclosure documents. There are very specific materials that you have to give to the executives when you are making them an offer of equity. These vary a little bit by country in terms of how detailed or how onerous they are. I think the one most people are familiar with is Australia—the document addendum to the executive. Not too terrible to pull together, but something you do need to be aware of in the beginning.
So I think the big picture point on the securities law side is that if you run into a situation where your compliance is going to be too onerous, cash awards and RSUs often require quite a bit less on the securities law side. That can be a very big benefit if you've got the ability to deviate in your company culture, such that you can have different awards for different executives in different countries, even if they are at the same pay grade. That can save you a lot of time and money in terms of your compliance, and it can be something that just makes the program run smoother.
Now, moving on to slide eight, exchange controls are another concern, although a little bit less with some of these executives, especially if they are global and mobile, and I will discuss that in a moment here. Often, the big issues here on the exchange control side come up with whether or not money is crossing borders. Say someone is exercising an option, they want to pay the exercise price and sell the shares, then bring the money back into the country. What sort of hoops do they need to jump through to make that happen?
The types of compliance do vary quite a bit with the program. It could be a plan approval or a requirement on the part of the company or the grantee. The most common example of the grantee requirement is that they need to repatriate. That does come up in a number of countries, so you need to bring the funds back across borders.
In terms of how this will impact an executive and in particular, a global executive, it's a little bit different. Let's say you had someone in the U.S. that you are going to send to another country. They would very often maintain a bank account in the U.S. That can alleviate some of those concerns, that the money that is actually leaving the country. It is what drives the compliance. In such cases, oftentimes, they will pay their exercise price from their bank account in the U.S. and that may eliminate your requirement.
So, a lot of these requirements go away at the end of the day if you have a mobile population, but still something to consider. If that doesn't work, there are some alternatives that can avoid the exchange control requirements. If you find that exchange control is going to be a problem, for options, you can require a cashless exercise, and that will solve the problem. Then there is only money coming back in to the country. If you have an RSU, where there is actually no money leaving the country, that can be a benefit as well, and make compliance a little easier.
In terms of taxation, this is probably going to be the biggest concern with your executives and something that everyone seems very worried about. For executives who transfer, is the tax rate going to be quite a bit higher than it would have been in the U.S.? What about the social insurance? Is that going to be outrageous? There are different ways to deal with this.
From the taxation side, always look into this beforehand. In terms of the executives themselves, it's always good to look into what their specific situation is. If you have an executive you are transferring, you may be tax equalizing them. So, that may be something the company is very aware of and interested in as well. It's always good to look into that beforehand with each award type and make sure everything matches up with everybody's expectations.
In terms of social insurance, some of these rates can be very high outside the U.S. If you do have a short-term transferee, it is worthwhile to look into whether or not the U.S. has a totalization agreement with that country that you can take advantage for the executive. That can be really beneficial if they are going to be in country less than five years.
On the employment law side, there's two main things we need to consider with the grants. And the first is, will repeated grants give rise to any acquired rights or any other issues that wouldn't necessarily apply in the U.S.? The second item here is if we are including the equity for the executives and things just don't work out, is that going to increase the company's severance obligations? These are things that are good to have a general understanding of before you actually make the grant. Just in case things don't work out, you want to know what the back end issues might be.
Finally, I'd say consider the administration. On the forefront, it always looks good to provide the executive the best tax treatment and an award that is the most beneficial. But if it's going to lead to administration concerns or something where you've got just a huge amount of administration for one or two people, it just may not make sense. It is always good to weigh the cost and benefit before you actually go through and make grants to the various executives.
Now, in terms of big picture decisions or takeaways, I think the biggest one is to always keep in mind that if you're going to use alternative awards to make the compliance easier, it is worth looking into. A lot of times, you have just a few grants and it doesn't make a lot of sense if the compliance is going to be very expensive.
I would say consider tax-qualified programs carefully, especially with regard to the tax ramifications for that specific executive. Something that looks like a very good benefit may not be, at the end of the day. Finally, if the country looks like it is just going to be too onerous, consider whether or not the cost outweighs the benefit. It very well may in certain cases or it may make sense just to give them a cash award. In those cases, it may not be the most preferable award for the executive, but it may be something that makes sense from a company standpoint.
With that, I will turn it over to Justin to discuss the U.S. regulatory requirements.
U.S. Regulatory Requirements
James: Thanks, Robert.
This might be a rehash for some or most of you, but we think it is very important. As many of you are aware, not only with your stateside executives, the regulatory requirement—Form 144—who is responsible for this? It is well documented that, ultimately, the regulatory requirement and disclosure is the individual's responsibility. But, in the U.S., it is a different business model than we see around the globe with other broker dealers. We know that, traditionally, the U.S. broker dealers have done the filings on behalf of most of your executives. In most cases, companies still keep this internally and prefer to have control over it. Eighty-five percent of the people we have polled over time tend to farm this out. And this is where it gets kind of lost in translation when we see foreign executives.
So, it's very important to ensure your foreign executives understand the filing requirements. When is the Form 144 due? We all know that it needs to be postmarked no later than the date of the trade. That gets a little offset from time to time when you've got people over in Europe or in the Asia-Pacific region—we've found that this complicates things and there seems to be some misunderstanding of when these documents need to be postmarked into the SEC. Again, clarity and communication are the most important things here and obviously, what information needs to be included. That is pretty self-explanatory with the regulatory requirements: trade date, volume, share count, prior sales in 90 days and such.
The other piece of it here is the Forms 3, 4 and 5. I can tell you that we found time and time again where a U.S. executive or a foreign executive of a U.S. company, because they are overseas, are out of sight and out of mind. We have found many times that these people are kind of forgotten or missed when it comes to the Form 3, 4 and 5 filings. Again, communication and documentation seem to be the most important thing—HR and the finance group working hand in hand to ensure that these regulatory requirements are taken care of.
As Rule 10b5-1 plans have become popular over the last four or five years, we are finding more and more corporate boards and compensation committees pushing executives into 10b5-1 plans for a number of different reasons. For your foreign executives, in particular, to ensure that they have scheduled trades and they don't fall off the radar. Obviously, the pros there—you've got an affirmative defense. There is flexibility to sell all year long, during blackout periods or not, as well as it gives the company—and this is the most important thing for your foreign execs—it gives the company visibility into the upcoming trading activity to ensure that the forms are covered.
Some of the cons, you're locked into a trading schedule and some people find that a little prohibitive. Most companies don't allow trades outside of their 10b5-1 plans, so, there are a number of things that need to be communicated with the executive to make sure that they understand that they are making a well-rounded decision prior to engaging in a plan, whether it'd be for the benefit of the company or for the individual themselves.
One of the other issues we have is some foreign tax issues. And, Jason, I will turn that over to you.
Foreign Account Tax Compliance Act (FATCA)
Jason Newman, First VP & Financial Advisor, RBC Wealth Management USA: Thanks, Justin.
I am going spend a few moments now discussing the Foreign Account Tax Compliance Act or FATCA. As a whole, FATCA is quite broad. So I'm just going to discuss some key points today.
FATCA is part of the Hiring Incentives to Restore Employment or HIRE for short. This was signed into law on March 18, 2010. The U.S. Treasury issued FATCA guidance over the past three plus years through various tax notices, announcements and proposed regulations. The final regulations were issued January 17 of 2013. However, proposed and temporary regulations modifying the final regulations were issued on February 20 of 2014.
FATCA is a U.S. law requiring foreign financial institutions, or FFIs for short, to discover and disclose their U.S. owned accounts, equity and debt holders to the IRS. In a nutshell, this law was put together to try to identify those U.S. persons who may evade U.S. taxes by investing through direct foreign accounts like basic individual or joint accounts, or indirectly through a foreign entity such as corporations or trusts.
An FFI is any non-U.S. entity created or organized outside the U.S. that accepts deposits in the ordinary course of a banking or similar business, holds as a substantial part of its business financial assets for the account of others, is engaged or holds itself out as being engaged in the business of investing, reinvesting or trading in financial instruments such as mutual funds, hedge funds, private equities et cetera or an insurance company that issues annuities or cash value insurance policies. Now, this definition is very broad and covers some types of entities that are not traditionally considered financial institutions. One item to note, non-compliance to FATCA may result in the IRS imposing a 30-percent tax withholding on certain U.S. sourced income paid such as interest, dividends, rents and in gross proceeds from sales which are referred to as withholdable payments. This may also result in market risk and reputational risk.
Moving on to slide 14, for the IRS to accomplish their objective with FATCA, they encourage foreign financial institutions to sign agreements with the U.S. to report information on their U.S. account holders. The IRS also encouraged foreign entities to provide information on their U.S. owners or investors. Any participating FFI must document all account holders and counterparties, withhold on non-compliant persons and have documented processes and procedures which can be verified. FFIs are required to report information regarding U.S. accounts to the IRS on an annual basis. They also agree to provide the IRS with additional information regarding U.S. accounts upon request. All in all, the burden of complying with FATCA falls both on the recipient and the payor.
As you can probably imagine, FATCA was not immediately accepted by the international community. A lot of foreign countries felt intense pressure by their own financial institutions to reduce the burden of FATCA rules and regulations. In fact, many countries and institutions started issuing complaints directly to the U.S. Treasury Department.
Finally, in February 2012, the United States and various other countries issued a joint statement declaring their commitment to FATCA. Those participating countries agreed to cooperate in combatting international tax evasion, explore framework for FATCA implementation and remove any local legal barriers so FFIs could comply with FATCA.
On slide 15, what you are seeing now is a FATCA map. On the right side of the map is a color-coded indicator showing which countries are model one and model two signed or model one and model two agreed in substance. Model one require FFIs to report all FATCA-related information to their own governmental agencies, which would then report the FATCA-related information to the IRS. Some model one IGA or intergovernmental agreements are reciprocal, requiring the U.S. to provide certain information about residents of the model one country to the model one country in exchange for the information that country provides to the U.S. An FFI covered by a model one IGA will not need to sign an FFI agreement. But, it will need to register on the IRS' FATCA registration portal or file a Form 8957. Model two require FFIs to report information directly to the IRS. Under such IGA, FFIs will need to register with the IRS and certain FFIs will sign a version of the FFI agreement modified to reflect the IGA.
As you will see from this map, more than 80 nations and 77,000 financial institutions have agreed to cooperate. With that said, just because a country has agreed to comply doesn't mean an FFI located within that country is required to. What we have been seeing today is those FFIs that have decided not to comply are asking any clients who are now living in the U.S. or are considered a U.S. taxpayer to either move their assets out or liquidate everything in the account. By doing this, the FFI can avoid the requirements of FATCA because they have now chosen not to do business with that person or entity.
Finally, on slide 16, we are going to discuss who is considered a U.S. person – a person who is a citizen of the U.S. including an individual born in the U.S. but residing in another country and a person who has not renounced their U.S. citizenship; a lawful resident of the U.S. including a U.S. green card holder; a person who resides in the U.S.; a person who spends a significant number of days each year in the U.S. This is a day count test and based on a number of days you are in the U.S. over a three-year period. A joint account held by both U.S. and non-U.S. persons will be subject to FATCA regulation and will be treated as an account of a U.S. person.
I am now going to pass it over to Robert, who will be discussing some administrative considerations.
Administrative Considerations
Marshall: Thanks, Jason.
With mobile executives, there are a few administrative concerns that come up for basically all companies. And some of these are more difficult than others.
The first one we have seen is that when you do have mobile executives, do you have a program in place to track these executives? This is one of those things that we have seen many companies really struggle with for years now. And it is very important to know when they do enter the country, when they leave the country and just being able to tell generally for tax purposes in terms of how the income is going to be pro-rated and other similar considerations. This is something to keep in mind if you do have a mobile program.
The second consideration with an executive that may be moving to another country is whether they receive their whole salary in local currency, or whether a portion of that will still be paid in the home country, for example, in the U.S. We do see a pro-ration very often apply to these situations and there are similar benefits in the tax arena of doing that.
Another consideration that comes up quite a bit on the admin side, is what are we going to do if the executive just doesn't work out? There are some termination considerations that are a little bit different outside the U.S. One of the biggest ones is in terms of any severance that will be included. They typically don't have at-will employees in most countries outside the U.S. So, one of the things we see a lot of companies do—if they have an executive that doesn't work out and they are just on a short-term program—they will bring them back to the U.S. and then terminate them here. That can resolve some of these issues, so it's worth keeping that in mind going forward.
Two final points, I think, on the administrative side. When you do have executives in another country, it is important to realize that local countries have their own insider trading requirements. We typically default back to the U.S. standard and that does work for most countries, but not all. You want to make sure the executive doesn't run into some sort of issue with that broader interpretation or a broader law in another country than we have in the U.S.
Finally, there is some new E.U. legislation that did make changes in terms of the requirements that apply for what is basically Form 3, 4 and 5 reporting outside the U.S. Now, this can apply for shares that are traded, say, in the E.U. or also if it's just a dual listing. Something to keep in mind, you don't want your executives run afoul those requirements either.
And, with that, I will turn it over to Justin.
James: Thanks, Robert and thank you for that information as well.
We went over quite a few topics here quite quickly between plan design, regulatory requirements, filing requirements, trading plans, as well as some global considerations including the FATCA implications. We wanted to ensure that you have got our contact information, which is on slide 18. And if there are any questions out there, we wanted to leave a little time here at the end.
Kathleen, I would like to turn this back over to you and see if we have any Q&A from any of our guests on the line.
Cleary: Great. And Amanda is our coordinator for today's call. Amanda, if you will enable the Q&A session, and explain that to our listeners?
Operator: My pleasure. If you would like to ask a question, please press star, then the number one on your telephone keypad. That is star, one.
Cleary: OK. While we wait and see if there are any questions coming in, I just want to take a minute and say thank you to our expert panelists, Justin James, Robert Marshall and Jason Newman, for all of their time preparing for and for presenting this webcast today. I really appreciate their help and I think they gave you, our listeners, a lot of practical advice as well, which you can take back and apply to your company's equity plans.
Amanda, are you seeing any questions coming in?
Operator: There are no audio questions.
Cleary: OK, then, I will go ahead and wrap up our webcast today.
For our listeners today, if you want to listen again, we will be posting the audio archive immediately after this live session concludes and we'll post the transcript in about two weeks.
Thank you, again, to our expert panelists, and to our audience for listening in today. I hope that I will see you all at our conference in October. Thanks, everyone, and that concludes our webcast for today.