Having turned the calendar to a new year and a new decade, it is timely to look at some of the major issues negatively impacting stock plan administration and more importantly, how they can be avoided.
Certainly, your professional success as well as the perceived success of your company's plans will be at least partially judged on how effectively you execute with respect to the ten areas below.
So, in no particular order, the following are some key considerations to enhance the overall effectiveness of your employee incentive plan.

1. No single person responsible for overall plan administration.
   While the plan itself typically designates the Board or the Compensation Committee as the overseer of the plan, the responsibility for effective and efficient day-to-day operation of the plan falls to equity compensation "experts" within the organization.
   Within this group of experts, it is essential to a program's success to have a first among equals, analogous to the conductor of an orchestra, for monitoring the program's overall operation.
   Extending this analogy, the conductor must understand the deliverables and accountabilities of all areas that touch the plan.
   Failing to coordinate across all these areas is asking for a discordant performance.
   It should be clear to executive management and to everyone else involved with the program who your plan's conductor is.
   This is the person to whom the CEO or the Board Chairman will turn when there are questions or issues.
   This person should have the status and title to effectively carry out this role.
   
2. Not creating procedures for all major activities.
   Now that we've established the importance of the equity compensation program "coordinator", an essential role of that person is to ensure that procedures are created for all key transactional, filing and reporting activities.
   Nothing ruins a plan administrator's day quite like a failure to complete a requested stock option exercise or missing the deadline for an SEC Form 4 filing.
   
3. Failure to measure the total expense of your equity compensation plans.
   Certainly, great emphasis is placed on the accounting expense and shareholder dilutive impact of your equity compensation program and rightly so.
   However, the total cost of your program includes all the administrative expenses and cost of errors relating to the program (see #2 above).
   To measure the cost effectiveness of your plan, you need to understand where and what all these costs are and then take steps to improve the plan's cost effectiveness.
   
4. Failure to specify key performance measures for success of your equity program.
   This is the "benefit" side of the cost-benefit analysis to the cost side above.
   Internally, and with the agreement of management, determine the success factors for your plans.
   These factors should be quantitative and measurable so that you can regularly track results against those standards.
   Don't be afraid to raise the bar over time.
   
5. Deficient participant communications.
   Don't overlook the importance of communicating with your plan participants (think of them as "your customers") clearly, regularly and concisely.
   As experts in the field, plan administrators may assume a knowledge and appreciation of the plan among the participants which, absent a good communications program, is typically not be the case.
   Even though plan beneficiaries often are higher level managers in the organization, they may undervalue their awards if they don't both fully understand how and when those awards will directly benefit them and as important, how they need to perform to achieve the desired outcome.
   
6. Failing to survey the program's constituents.
   Continuing the "customer" concept from above, how do you know whether your plan is operating well without surveying your plan participants and other organizational areas which are impacted by your plan? Are there some existing deficiencies which can be improved on? You won't know unless you ask.
   Use a simple-to-complete and easily understood survey (on-line if possible) to boost your response rate.
   Also, attempt to standardize surveys over time so that you can do trend analysis to hopefully establish new performance standards and document improvements to the program.
   
7. Assuming that one size fits all wherever your company has operations.
   In an era of globalization, plans operating across multiple countries provide the stock plan administrator added challenges.
   The securities registration and filing, tax, accounting and privacy requirements may differ dramatically across many of the countries where your company's plans operate.
   And if the above was not enough, ignoring international employee mobility tracking and related tax withholding requirements can come back to bite you.
   
8. Garbage in-garbage out.
   Although this is presumably obvious, don't neglect the data integrity of your plan.
   Unless you are auditing all transactions and monitoring plan shares granted against shares approved and plan shares issued against total shares outstanding on a regular basis, it is easy for your plan data to get seriously out of balance.
   This is not something for which you want to depend on your auditors; data deficiencies suggest control issues and will raise a red flag for the audit overall.
   An ounce of prevention is worth a pound of cure.
   
9. Not keeping current with changing requirements.
   Equity compensation practitioners are aware of how frequently securities, tax and accounting standards can change.
   Remaining abreast of these changes, while undoubtedly challenging, is essential to having a compliant plan.
   Also, don't forget to verify that your equity plans software remains current.
   Knowing about the changes is only half the battle; ensuring that your software allows your company to conform to new requirements is the other half.
   
10. Not knowing when to go outside for help.
    While we would all like to be completely self-sufficient in managing our companies' equity programs, the reality is that the coordinator role is both complex and dynamic.
    Any one individual cannot necessarily be expected to have a mastery of all the securities, accounting, tax, payroll and international plan requirements associated with a plan's operation.
    Know when to ask for help, and determine where there is expertise for a particular area.
    

Being mindful of pitfalls and taking the necessary steps to avoid those listed above should go a long way to ensuring your and your company's plans' long term success.
We sincerely wish you success and prosperity in 2010! Keep in mind that if your list of New Year's resolutions includes some of the great tips & suggestions provided above, you're in good company.
Solium Equity Consulting has the depth of knowledge, expertise and experience to assist! Contact us today at 248.
348.
7104 or email us for more information about our services and offerings.