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Four Key Reflections from 'Directions'

Monday, September 19, 2016
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Every year, equity compensation professionals from around the globe convene at E*TRADE Financial Corporate Services Inc.'s Directions Conference -- now in its 30th year -- to discuss trends and exchange ideas with peers. This year was no different, as hundreds of stock-plan professionals gathered in Miami, discussing the latest trends in equity compensation and putting their heads together to forge new, industry-shaping ideas. From our many conversations and sessions with stock-plan industry practitioners, we distilled a number of key takeaways; here are four that should serve as hearty food for thought for any benefits professional.

1. Equity compensation isn't just for the top brass. Equity compensation, long associated with executive pay packages, has evolved into a vehicle to attract and retain top talent outside of the C-suite. In a tight labor market, companies should take a hard look at compensation structure to find differentiating methods of incentivizing and retaining their employees (and attracting new ones).

Not entirely satisfied with just a salary and bonus, we have seen that younger generations are becoming more interested in companies at which their financial future is at least in part aligned with the success of the company. This represents a powerful paradigm shift in the labor force. Today, employees may favor equity instead of a larger salary. In fact, we have noted that some large organizations -- not just startups -- are paying heed to this trend, offering blends of compensation allocations that allow employees to weigh their own cash salary against different levels of equity. For those who strongly believe in the future success of a company, equity compensation may drive career decisions.

2. Administrators are working to do more with less. As equity compensation benefits increasingly become a tool to help attract rank-and-file employees, administrators face the compounding problem of administering more plans and engaging more participants. To this end, organizations are turning to digital and mobile modules to complement human interaction, helping to alleviate much of the burden and difficulty of administering stock plans. Companies experiencing rapid growth, and international expansion in particular, are often looking to take advantage of this structure, which allows digital platforms and plan administrators to work hand-in-hand.

3. Onboarding is going on-demand. Stock plan administrators now view the onboarding process differently; the multi-day orientations in conference rooms, intermittent communication from HR, and plan details arriving in a large stack of papers on the frenzied first day on the job are all in their twilight. Instead, from what we are being told, companies are implementing a self-directed approach that includes on-demand seminars, live trainings, and rich online multimedia and mobile content -- helping to empower the employee to educate herself about her investment in the company at her own pace.

4. Plan participants remain perplexed. From our conversations with clients, many plan participants continue to struggle to understand aspects of their stock plan benefits, including, quite simply, how their plans work. According to the recent E*TRADE Corporate Services Annual Participant Survey, two out of five stock plan participants don't understand vesting, and two out of three don't understand the tax implications of their awards and/or benefits.

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This should not come as a huge surprise, as a stock award may be an individual's first foray into equity investing. This underlines the notion that understanding stock plan benefits may be a complex undertaking and one a company should not take lightly. The more organizations can do to educate and engage participants, whether in person or online, the more potential there is for them to understand and value this compensation component, and thus may value their employer for providing it.

As the insights above suggest, Directions 2016 was extremely productive. With roughly 400 attendees, there was no shortage of compelling and intriguing ideas, lively presentations and earnest discussions about what is in store for equity compensation down the road. One thing, however, is certain -- as stock plans grow in prominence, so too does the importance of educating and engaging plan participants. As we look to Directions 2017, we are likely to continue witnessing these trends in the makeup and structure of equity compensation benefits, as employers continue to search for the best ways to attract, engage and retain talent.

Employee stock plan solutions are offered by E*TRADE Financial Corporate Services Inc. Securities products and services offered by E*TRADE Securities LLC, Member FIERA/SPICE*TRADE Financial Corporate Services Inc. and E*TRADE Securities LLC are separate but affiliated companies. E*TRADE Financial Corporate Services Inc. is not affiliated with Human Resource Executive and all commentary is owned solely by E*TRADE Financial Corporate Services Inc.

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