efficient equity administration: doing more with less...efficient equity administration: doing more...
TRANSCRIPT
Efficient Equity Administration: Doing
More with Less
Howard Runyon, CompIntelligence
Marsha Tepper, CEP, Morgan Stanley
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Agenda
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Overview
Manual Work Discussion
Automation Discussion
Case Studies
Q&A
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Overview of Manual Work
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Everyone does it – we are all data warriors! Common examples of manual work:
– Data reconciliation
– Data analysis
– Import file creation
– Reporting
– Participant communications
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Why We Do Manual Work
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Immediate need, no time to really examine the problem and the solution
Lack of staff and / or funding
It works!
This is a one-time task (I think?)
It is the most efficient solution (I know my data best)
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The Problem With Manual Work
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Not easily repeatable
Time consuming
Minimal or no controls in place
Risky as easy to make errors
May require extra staff
Keeps you from doing more important tasks
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What can you do?
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Change your process
Hire extra staff, could be temp staff when needed
Push the work to someone else
– Internal group
– Vendor partners
Add automation
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Consider Automation
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When not in a crunch, consider the problem and possible solutions:
– Can the solution be automated?
– How much time will it take?
– Is there funding or can I get funding?
– Are tech resources available internally?
– Can I hire outside help?
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Steps to Automation
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1. Identify the problem and the solution
2. Create a Business Case
a. Justification
b. Approximate cost and time for development
c. Company and department benefits
d. Identify potential resources
3. Present the case / idea and get management buy in and agreement for funding
4. Possible RFP / RFI
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Steps to Automation
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5. Meet with internal and / or external resources
6. Select the team
7. Involve your security or compliance team
8. Create the specifications
9. Development
10. Testing and QA
11. Go Live
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What is “Automation”?
Wiki - Business process automation (BPA), is the strategy a business uses to automate processes in order to contain costs. It consists of integrating applications, restructuring labor resources and using software applications throughout the organization.
Tasks can be partially or fully automated.
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What is “Automation”?
Wiki - Business process automation (BPA), is the strategy a business uses to automate processes in order to contain costs. It consists of integrating applications, restructuring labor resources and using software applications throughout the organization.
Tasks can be partially or fully automated.
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Levels of Automation for Stock Plan
Notify
Reports Created/Updated
Transaction Taxes back to Payroll
YTD Tax to Equity Platform
Demographic to Equity Platform
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Prior to automation
Document specific procedures, break them down into tasks
Prioritize tasks by time savings:
– “Must have” items should be tasks that save you the most time
– Remaining tasks should be in sequence to “connect the dots”
Take advantage of what you already have
– SFTP
– API’s
– Schedulers
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Items that can be automated
Instead ask “what cannot be automated” - think outside the box.
It’s OK to eliminate redundant work. Spend time building instead of maintaining.
Syncing of disparate systems is a great candidate for automation (payroll/HR/Equity).
End to end equity transaction (transactiontaxespayrollstatementnotification)
– Transactions can be: option exercises, award vesting, ESPP dispositions
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Information Flow Sample: Everyday Data
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HR Worldwide
Demographic Equity
Platform
Importer (GEM,SFTP)
Equity
Platform
Payroll USA
Payroll International
Tax Codes, YTD Tax
Consolidated File
Data
Collection/Conversion
Tool
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Information Flow Sample: Transaction Data
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Payroll International 1
Converted to GBP
Equity
Platform
Exporter (GEM,SFTP)
Equity
Platform
Payroll USA
Payroll International 2
Converted to CHF
Payroll Report (USD)
Remain in USD
Data
Collection/Conversion
Tool
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Information Flow Sample: Reporting
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Employee
Portal
Custom Release
Report
Equity
Platform
Exporter (GEM,SFTP)
Equity
Platform
Confirmation of Release Data File
Notification sent to employee
Reporting Tool
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Expiring FTP passwords
Termination Timing (avoid premature notification)
IT roadblocks can stifle implementation
– Not enough staff
– Not enough budget
Hands-off memory loss
– You tend to forget “how it works” (e.g. phone numbers on cell)
Security, Security, Security
Automation Pitfalls
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Case Study #1
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Management problem:
– Critical global function overburdened with complex manual processes due to Compliance requirements
– Not sustainable in a resource constrained environment
Steps to identify and validate the problem:
– Documented processes to understand complexity driven by compliance requirements
– Validated compliance requirements with internal and external stakeholders
– Determined proper ownership of tasks & reassigned where appropriate
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Case Study #1
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Steps to identify and validate the problem (continued):
– Implemented vendor changes where possible to streamline internal processes
– Created a ROI for different solutions: implement automation or hire additional temp help
Management Requirement:
– No new headcount
– Team to become more strategic
Management solution:
– Senior management approved budget for external automation.
– Management commitment to support and build automation was key to securing budget resources over several years.
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Case Study #1
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General goals:
– Reduce manual processing time
– Maintain or increase accuracy
– Create streamlined, scalable and standard procedures
Not all stock plan processes suitable for automation:
– Some are too unstable with continual changes
– Some are not controlled by the stock administration group
– Some are too costly to build given low volume of transactions
Phased approach required to build and assess benefits actually received from automation
– Must prioritize - can’t do everything at once
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Case Study #1
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Task Time to complete
prior process
Time to complete
with automation
Time Savings
Data Verifications 10 hours < 1 hour 9 hours
Pre-Vest report verification 8 hours < 15 minutes 7.75 hours
Mobility Tracking 20 hours < 30 minutes 19.30 hours
Payroll Data Request 4 hours < 15 minutes 3.75 hours
Totals 42 hours 2 hours 40 hours
• Total time savings for full year’s vesting events: 84 hours
• Time savings for first set of automated tasks: 40 hours
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Case Study #2
Magnitude of daily equity transactions
Budget restraints
Administration headcount – no increase in sight
RSU withhold-to-cover for all US employees
– Refund to employees for excess money withheld
– No easy way to efficiently process
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Problems/Concerns
Manual Process = Potential Errors
Manual process of Cash Bonus Award agreements
Manual process to mail year-end tax reports
– 3,200+ envelopes
– 9,000+ forms
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Solution
Automate as many manual functions as possible
– Nightly employee data feed from SAP to EEO
– Daily option exercise feed from EEO to ADP
– RSU release reports from EEO to ADP
Additional report instructing ADP to refund the excess money
– Feeds from ADP to EEO
Supplemental and Regular Wages
Withholding for Social Security and Medicare
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Solution
Tax bucket set up for new employees in EEO
Implement an Equity Reporting Portal
– Post all year-end tax forms
– Cash Based Bonus grants
– Confirmation Statements
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Benefits
Stock Administration no longer creates or modifies:
– Accounts in EEO
– Tax buckets within EEO – even when an employee moves
Employee files are created and kept up-to-date
Excess taxes are not being withheld at option exercise/RSU release
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Benefits
Accurate taxes:
– Payroll has almost no “re-calcs” due to incorrect tax withholding or rounding
Much less manual work:
– The majority of manual tasks for accounts, mailings, and daily feeds to payroll have been eliminated
Decrease in mistakes!
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Benefits
Most year-end mailings have been eliminated:
– still mail to terminated and employees requesting hard-copy
Ability to do more with today’s staff count
Increased work/life balance for staff!
– Happier staff
– Less stress at work
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Questions?
Howard Runyon
Marsha Tepper, CEP