What are [Employee Share Plans]? And what can they do for you?

There are many sorts of Employee Share Plans. They all have in common that they offer a possibility to let key employees participate in the long-term success of the company. As opposed to classic "bonus" models ("short-term incentive" / STI), typically focusing on a 1-year indivual performance cycle, Employee Share Plans (or, more broadly, "long-term incentives" / LTIs) come with a multi-year perspective and a focus on overarching company performance. E.g., based on strategic / financial objectives or directly on the company value creation. This has positive effects on various levels:

  • For the company and its shareholders: Retention of key contributors; additional argument to win specialists and experienced managers in a tough employment market (or, depending on industry and functions, even a must-have to be able to offer compensation packages in line with the relevant market); long-term perspective; alignment of interests between company, shareholders and key employees / management; promotion of enterpreneurial thinking (from employees to co-enterpreneurs); stronger link between variable compensation and sustainable business success; depending on type of model, a reduction in costs / cash-out.
  • For employees: Attractive, modern compensation packages, including the possibility to realize higher total compensation amounts, subject to relevant business success; depending on type of model, beneficial tax treatment (e.g., tax-free capital gain in Switzerland).
The choice of a suitable type of Employee Share Plan / LTI depends on a company's strategy, aims, preferences and means. This is what we will find out together in the first phase of a consulting project. Generally speaking, there are two basic categories of Long-Term Incentive Plans:

  • "Real" participation models: They enable participants to become actual shareholders in the company; either directly upfront (classic share purchase plan), or over a certain period of time, subject to ongoing employment and/or the achievement of pre-determined performance objectives.
  • "Unreal" participation models, also known as "phantom" or "virtual" models: They reflect the economic effects and conditions of a real participation, however, only providing for a payment in cash instead of actual share transfer.

The below graph shows and overview of the most important basic LTI / Employee Share Plan models. The various terms, mechanisms, pros and cons will of course be discussed and explained in detail, and step by step, at the beginning of a consulting project and throughout.

Our [services]

An interdisciplinary one-stop-shop

[dialog]unlocked is a specialized, interdisciplinary one-stop shop for [Employee Share Plans]. We have dealt with this topic, on a daily basis, for more than 17 years, and supported clients through all project phases and disciplines. Below you will find an overview of our [services], followed by a few words about our [clients].

"Design" phase

This starts with the conceptional design of a new LTI and the relevant questions: Which LTI models are available? How do they work? What will fit with your corporate strategy for the foreseeable future? What are the resulting advantages and disadvantages? What are your competitors doing? What do shareholders, investors, management, and employees expect? This phase may include, for example:
  • Workshops (face-to-face or online).
  • Concept papers / presentations / memos.
  • Fact sheets: Concise overview of the customised LTI for your business.
  • Illustrative calculations: Benefits for employees, costs / cash-out for the company, dilution for shareholders.
  • Also important at this stage: Consideration of the legal, tax and accounting implications to avoid unpleasant surprises during implementation. We proactively take this into account right from the start and in all project phases. This is the advantage of an interdisciplinary one-stop shop for [incentive plans].
  • With listed companies, this will also include regulatory considerations (e.g., previous "VegüV" requirements, now part of the Swiss Code of Obligations), e.g., regarding prohibited remuneration elements and disclosure of incentive plan instruments in the annual remuneration report.
  • For SMEs and start-ups, this also includes our advice on the valuation of LTI instruments for Swiss employee tax and compensation purposes.
  • In addition, when required and where your LTI is also to be applied in other countries: "Country Checks". For each relevant country, we check and confirm the feasibility, important regulatory requirements (e.g., registration requirements for certain LTIs such as in the USA, China, Australia, etc.), the income taxation of the LTI and employer obligations in this context (reporting and withholding), in cooperation with a global network of local specialists.

Implementation and communication

Once the concept is agreed (e.g., based on a confirmed fact sheet), it is time for actual implementation and communication. This can include, for example: 

  • Preparation of legal / contractual documents (plan regulations, award notes, grant agreements, contract supplements, etc.).
  • Tax rulings: clarification and confirmation with the relevant tax authorities, e.g., regarding tax dates and/or tax-relevant valuations.
  • In the case of international implementation: Support with regulatory implementation, e.g., registration with relevant authorities (such as in the USA, China, Australia, etc.). In-depth local clarification (legal, tax) where required; in cooperation with local specialists.
  • Advice on mapping the instruments across into payroll (Switzerland: LTI-specific attachments to the annual salary certificate). 

Afterall, an LTI will be ineffective if employees fail to understand it. However, the legal / contractual documents are often (necessarily) quite technical. Communication is therefore all the more important. We can support you with this, for example, as follows:
  • Preparation of presentation materials and/or "flyers" (your LTI explained in simple terms, with graphics and illustrative examples);
  • Participation in meetings / presentations;
  • Q&A documents; etc.

Our [clients]

We have dealt with [Employee Share Plans] on a daily basis for more than 17 years across all industries and company sizes, both in Switzerland and internationally. Generally speaking, our clients can be divided into, roughly, two equal categories: 

  • Listed companies: Here, LTIs are usually common practice, and our work often involves adjustments to reflect changing market trends or business developments, disclosure requirements in the remuneration report, or to provide support around international implementation.
  • Unlisted companies, SMEs, start-ups: The core issues often revolve around understanding the mechanics of LTIs, actual feasibility, valuation, and impact - on the company and shareholders - as well as the practicalities of implementation.

Of course, we can offer our consulting services entirely in English or German or a mixture, as suits our clients’ needs. 

Selected projects and feedback from clients:

  • Cowa Thermal Solutions AG, April 2023: " Marc Seematter von [dialog]unlocked hat uns sehr kompetent beraten und uns ermöglicht, mit minimalen Aufwänden zügig ein attraktives Beteiligungsprogramm für Mitarbeitende zu implementieren. Seine Erfahrung in dem Fachbereich ist beeindruckend." (Remo Waser, Co-CEO)
  • Arctive AG, February 2022: "I could not have imagined a better partner than [dialog]unlocked. Marc developed our equity participation model in a highly professional, very experienced and focussed manner. He coordinated officials, stakeholders and other involved parties in close contact with myself and our board. Things just work and happen when he is around. The excellent result we achieved ensures we can continue to attract and retain the top talent we need to execute our vision." (Christian Tübing, Owner)
  • VAT Group, May 2021: "VAT commits to meeting all regulatory and legal requirements it is faced with. Through engaging [dialog]unlocked, we continue the successful collaboration with Marc Seematter, who provides us expert advice to our complete satisfaction on the tax and legal implementation for our global long-term incentive."