Equity compensation: Balancing the rewards and challenges

Employers use equity compensation programs to attract, reward and retain talent. Equity programs can also help create a culture of ownership, which can inspire better business decisions, productivity and efficiency, and ultimately help boost the company’s bottom line. In addition, receiving stock-based compensation can offer equally positive outcomes for executives. They can be a substantial portion of their total compensation and a key component to building long-term wealth.

But managing equity programs can be complex and time consuming for employers and executives, who must carefully follow U.S. regulations as well as the company’s insider trading policy. For example, they have to ensure that controls are in place, records are accessible, and open trading windows and transaction reporting are timely. Executives also have to navigate issues related to their own personal financial health, such as taxes, diversification of their holdings, liquidity and integration of their equity awards into their full financial picture.

Strategies to help manage and maximize equity compensation benefits

A Rule 10b5-1 Trading Plan is one of the most common and useful tools to help employers and executives make the most of equity compensation programs while addressing the unique requirements of a company’s insider trading policy. A Rule 10b5-1 Trading Plan is a binding contract that specifies the amount, price and dates on which executives may trade securities. It is important to note that executives establish their own plans, working closely with their employers, advisors and legal counsels. Professional and systematic assistance with transaction reporting can also go hand in hand with these plans.

Because equity awards can play a significant part in executives’ overall financial wellness, working with an advisor can also be a valuable strategy to help them get the guidance, support and tools to navigate the challenges and rewards of their equity compensation and help optimize their wealth potential. An advisor can develop a personalized financial strategy to help them balance priorities and keep them on track with their goals.

Key takeaways

  • Download this guide to learn more about Rule 10b5-1 requirements.
  • Find out how equity compensation services can be part of a comprehensive benefits program to attract, reward and retain talent.
  • Direct equity participants to the Education Center on Benefits OnLine® where they can find short articles, videos and other resources to help them make the most of their equity compensation.
  • Talk to your Bank of America representative about our executive services, including assistance creating Rule 10b5-1 Trading Plans.

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp.”). MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC and a wholly owned subsidiary of BofA Corp.