This publication, one of a series of Guidance | Procedures | Systems (GPS) books from the Certified Equity Professional Institute (CEPI), is designed as an administrative-focused document that makes the bridge between compliance and controls easier to navigate for administrators of stock option plans in public companies. The book's chapters address key processes in equity compensation and provide a detailed assessment of critical financial, legal, and operational risks. For each process, illustrative controls and tests of controls to mitigate the risk have been identified. Stock options covered in this publication are limited to grants of at-the-money (exercise price is equal to fair market value of the underlying stock as defined by the plan on the date of grant), nonqualified (NSO), and incentive (ISO) stock options made to U.S. employees of U.S.-domiciled, publicly traded companies with time-based vesting.
This publication does not address grants to nonemployees, Section 409A deferred compensation issues, international and mobile employee issues, or private companies.
Table of Contents
2. Basic Concepts and Plan Design
3. General Administration
4. Administration Models and Technology
5. Grant Process
6. Exercise Process
7. Tax and Payroll Issues
8. Financial Reporting
9. Legal Issues
10. Changes of Employment Status
11. Employee Communications
Appendix A: Common Equity Compensation Terms
Appendix B: Acknowledgements
Appendix C: About the Authors
Appendix D: About Our Sponsors
3.7.1. Post-dated transactions are a result of many causes, including delay in the receipt of data and human error. The following are examples of post-dated transactions:
- A termination was not timely recorded in HRIS; therefore, the termination was not timely recorded in the stock plan platform. If an employee inadvertently receives a grant after termination, the grant may be invalid under the terms of the Plan. When the termination is recorded, the invalid grant is identified. Voiding the invalid grant is a post-dated transaction.
- An option was granted to Tony W. (William) Chun, but inadvertently recorded in the stock plan platform as granted to Tony W. (Washington) Chun. When the problem is identified, the option record is changed to the correct employee. Changing the grant details to correct an error is a post-dated transaction.
Note—Using unique employee ID numbers should eliminate this problem.
3.7.2. It is important to monitor post-dated transactions, especially when the post-dated transactions may have financial statement implications. Prepare a monthly report summarizing post-dated transactions and the reason for the post-dating. Track trends and identify opportunities for process improvements. For example, the monthly report on post-dated transactions indicated numerous examples where a nonintegrated subsidiary did not forward termination details on a timely basis. After additional training of appropriate staff, the timeliness of reporting terminations improved, but the Company should consider the cost-benefit to integrating the subsidiary.