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Is Stock Option Administration typically a function of Human Resources or Finance?

Accounting  Professional's Profile

Our HR department is taking the position that our Company's stock option environment has become too complex. It used to be fairly straight forward, they were generally all non-qualified stock options that were exercised in a cashless sale. But now we also have Restricted Stock Units, net settlement exercises, exercised shares being purchased by the company in the form of treasury stock, etc. So the HR department is taking the position that the stock option administration should be done by the Finance department, which of course we disagree with. Our company is not large enough to hire a full-time person to do this function in a stand-alone department. My experience is that the stock option administration function is almost always handled by HR. What is your experience on what department handles stock option administration?


Lyle Newkirk
Title: CFO
Company: Corrigo Incorporated
(CFO, Corrigo Incorporated) |

I would NOT delegate management of options to anyone outside of Finance. The risk of error is too high and regardless of who does the work Finance will be held accountable for any mistakes. You have audit, legal and control issues with high stakes in the event of any error.

Accounting Professional
Title: VP of Accounting
Company: Anonymous
(VP of Accounting , Anonymous) |

Thanks for your input. What about the actual "administrative" part, like speaking with the employee, speaking with employee's broker, coordinating with the transfer agent, etc. You see that part of the administration in Finance as well?

Nanah Bangura
Title: Equity Compensation Manager
Company: SAIC
(Equity Compensation Manager, SAIC) |

I am responsible for equity plan administration at my current company and have held this position at various companies within HR and the Benefits Accounting department. In my view, equity is a function of HR since it is long-term incentive compensation. Additionally, there needs to be a separation of duties for SOX compliance and to mitigate any risk of fraud.

However, I do think it is extremely important that your stock option administiration team understand how system changes and modifcations to grants and/or transactions impact the accounting and disclosures. Both the HR function and Finance need to constantly keep each other informed of post-close activities, plan design change considerations, new offerings, etc. so that each team fully understands the implications of such activities.


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