One of the founders of a company that offers software to help manage stock options and other equity offerings has some advice for HR leaders.
Kent Mansfield, president and COO of Carrolltown, Texas-based Boardroom Software, Inc., a maker of corporate equity (options) management software, offers some ways HR professionals can deal with stock options to avoid potential problems.
* Tracking: Any software program used by companies to track equity grants, such as options and restricted stock, should have a complete audit-tracking function.
This audit function should track the creation, modification and deletion of all equity instruments and related information, and describe what attribute was created/changed, who created/changed it, and when it was created/changed.
* Documentation: When an equity instrument, such as a stock option, is issued, there should be a corresponding set of documents evidencing the chain of events authorizing the grant.
In particular, the compensation committee of the board of directors, or similar authority, will approve the specific grant or series of grants, the plan agreement will allow for the eligible dates and types of grants being issued, and the grant agreement will set out specific terms of the grant.
These documents should reside in the equity-management software system itself in a linear audit trail, and be under audit control. Then, if there is a change to any attribute of the grant, a corresponding change in documented authority is required.
Additionally, any changes or replacements to the documents themselves should be under audit control and be reportable in the system. This gives the human resource professional clear evidence that the modification was approved by the board, and all related documentation is in place.
* Policies: Written policies and procedures for issuing options and restricted stock should be established by the human resource department and approved by the board of directors.
The approved policy should include, among other things, how to implement standard issuances of grants and the procedure for changing any attribute of a grant.
Approval procedures should be published with revision control.
Such policies and procedures should also be stored in the equity-management software system as a saved/scanned document, along with the board resolutions approving them.