The Impact of Increased Regulation on Global All-Employee Stock Plans

Transcription

1 The Impact of Increased Regulation on Global All-Employee Stock Plans Anna Fletcher, Group Senior Reward Manager, International Personal Finance plc Hannah Needle, Senior Associate, Tapestry Compliance LLP Lorna Parkin, Managing Associate, Tapestry Compliance LLP Claire Sykes, Director of Reward, Rolls-Royce plc

2 Welcome! Introducing our speakers Anna Fletcher Group Senior Reward Manager International Personal Finance plc Claire Sykes Director of Reward Rolls-Royce plc Hannah Needle Senior Associate Tapestry Compliance LLP Lorna Parkin Managing Associate Tapestry Compliance LLP

3 About International Personal Finance plc Leading international home credit and digital provider of consumer finance 25,600 agents and 7,000 employees Launched its first global all-employee plan in 2014 Won a GEO award for it in 2015!

4 About Rolls-Royce plc Global leader in world class power and propulsion systems One of the world s leading producers of aero engines for large civil aircraft and corporate jets 50,000 employees Preparing to launch its first ever global all-employee plan which delivers shares

5 What will we cover today? Regulatory landscape Introduction to Rolls-Royce and IPF global plans How to identify applicable regulations How to manage applicable regulations Some examples: regulations = obstacles or opportunities?

6 The regulatory landscape Setting the scene Some countries had Corporate Governance Codes pre global financial crisis Global high profile corporate failures Lehman Brothers, Freddie Mac, HBOS and others Bailout of banks by governments Possible causes: widespread failures in financial regulation and supervision and dramatic failures of corporate governance

7 The regulatory landscape Financial services first So, Financial Stability Board of the G20 issued FS remuneration principles for: o Banks o Investment firms o Asset managers o Insurance companies Includes: o deferral/retention requirements o malus and clawback o caps For example, in the EU: o CRDIV, CRR, UCITS V, Solvency II, AIFMD

8 The regulatory landscape Extension to other industries UK example: o Corporate Governance Code o Institutional shareholder views o Government policy Not limited to UK though e.g. US, Netherlands Not limited to executive pay either

9 The regulatory landscape Today Data Protection Laws FATCA/FBAR Gender Pay Reporting Market Abuse Prohibitions Remuneration Regulations Money Laundering Rules Prospectus Rules Employment Laws Corporate Governance

10 Introduction to Rolls-Royce and IPF Plans Plan type Rolls-Royce No. of countries IPF No. of countries Discretionary executive plan 20 4 Deferred bonus plan UK discretionary tax advantaged plan (CSOP) UK all-employee tax advantaged plan Global plan 3 4 x x (UK only) SIP & SAYE (UK only) SAYE (UK only) [ ] Circa 52 11

11 IPF global plan Objectives o Alignment with shareholders o Simple administration (employee and employer) and global consistency o Affordability o Clear communications Plan o Short savings period, single purchase and match 3 years later o All-employee o Low investment required but big return o Possibility to spread payments (from pay) o Portal and electronic communication where possible

12 Rolls-Royce global plan Objectives o Encouraging share ownership retention o Simple administration and global consistency o Affordability Plan o All-employee o Monthly purchase over 12 months, match 1 year later o Tax approved step outs where appropriate

13 Identifying applicable regulatory requirements Approaches to due diligence Who leads? Central team or local teams? Categorisation o Generally applicable o Country-specific Then what? o Obstacles or opportunities? o Where to focus time/efforts? o Action list feed into project timetable and project plan

14 Regulatory requirements Obstacles or opportunities? A few examples: o Tax advantaged variations o Securities laws requirements o Translations o Administration

15 Obstacle or opportunity? Tax advantaged plans Regulations applicable to tax advantaged plans constantly changing, e.g.: France Update Macron tax advantaged plan introduced French Tax Bill reversed some of the advantages Changes in interpretation of qualifying conditions UK Update Employee shareholder status abolished From end November 2016 Lifetime limit on tax free gains capped advantages from March 2016 All tax advantages for new agreements now gone

16 Obstacle or opportunity? Tax advantaged plans Rolls-Royce and IPF approach? Opportunity Tax benefits for employees (and often employer) Increased employee engagement and satisfaction Increased take-up? Follows a well worn path (framework for plan already set out) Obstacle Lose global consistency and equality of treatment between employees Increased expense (tax benefits outweigh?) May be extra administrative requirements e.g. trustee required

17 Obstacle or opportunity? Securities laws requirements Recent/upcoming changes: o EU prospectus requirements o EU dealing restrictions Country specific: o China shareholder approval required? o Luxembourg jointly hold assets

18 Obstacle or opportunity? Securities laws requirements Rolls-Royce and IPF approach? Opportunity Increased engagement Increased take-up? Rethink plan design? Obstacle Compliance requirements Filings Time, effort, cost Rethink plan design?

19 Obstacle or opportunity? Translations To translate or not to translate? o Legal requirement e.g. for employees in Quebec o To improve enforceability e.g. Indonesia o If English isn t first language o Targeted approach/everywhere? o Key materials/everything?

20 Obstacle or opportunity? Translations Rolls-Royce and IPF approach? Opportunity Increased engagement Increased take-up? Protect the company from legal risks Obstacle Costs Risk of incorrect translation Need to re-translate every time documents are updated Administrative burden

21 Obstacle or opportunity? Administration FATCA Foreign asset reporting Nominee reporting/kyc

22 Obstacle or opportunity? Administration Rolls-Royce and IPF approach? Opportunity Results in efficiency? Decreases risk? Obstacle Costs Understanding Resource

23 Conclusion Increased regulation: o How do you keep on top of it? o What issues are relevant for your company/plans? How will the regulations impact on your plans? o Securities laws o Employment laws o Corporate governance type laws How will you approach local tax laws? It s what you make of it! Obstacle or opportunity?

24 Thank You Anna Fletcher International Personal Finance plc Hannah Needle Tapestry Compliance LLP Claire Sykes Rolls-Royce plc Lorna Parkin Tapestry Compliance LLP

25 Thank You Thank you for attending GEO s 18 th Annual Conference in Rome. We hope you enjoyed this session. If you require CPE Credit, don t forget to Sign Out Two ways to give us your feedback on this session o Mobile app o Paper surveys available at the door