Managing Stock Administration

This chapter lists prerequisites and discusses how to:

• Administer participant information (record stock issuance instructions and identify insiders).

• Specify daily stock prices.

• Calculate stock balances.

• Manage stock splits.

• Manage dispositions.

Prerequisites

Before you begin to actively manage your stock administration system, you should define your stock administration business rules and set up the common setup tables.

See Also

Defining Stock Administration Business Rules

Administering Participant Information

This section provides an overview of participant information and discusses how to:

• Specify a participant's default issuance instructions.

• Enter issuance instructions for brokers.

• Enter registration instructions for stock certificates.

• Enter and update issuance instructions for multiple participants.

• Identify insiders.

Participant Information

With Stock Administration you can quickly access the human resources information that you need to administer your stock plans. In addition to viewing participants' job, employment, and payroll data, you can enter issuance instructions for individual participants and run the Mass Issuance Update Application Engine process (ST_RUNCTL_ISUUPD) to add issuance instructions for multiple participants. Finally, you can specify the insiders who are subject to SEC Section 16 reporting requirements and Regulation S-K proxy requirements.

Pages Used to Administer Participant Information

Specify a Participant's Default Issuance Instructions

Access the Maintain Issuance Instructions page (Stock, Issuance/Profiles, Maintain Issuance Instructions, Maintain Issuance Instructions).

Plan Type	Select Option Plan or Purchase Plan. If the participant is enrolled in both plan types, you can toggle back and forth to view the information for each plan type.
Mass Issuance Update	This check box is selected if the issuance instructions were created by a mass issuance update.
Issuance Type	Select Broker to have the shares held through a brokerage firm. Select Certificate to have the shares issued in the form of a certificate.
Edit Issuance Type Information	Click to display a page where you can enter additional issuance instructions. If the issuance type is broker, the Maintain Issuance Instructions - Broker Details page appears. If the issuance type is certificate, the Maintain Issuance Instructions - Certificate Details page appears.

Entering Issuance Instructions for Brokers

Access the Maintain Issuance Instructions - Broker Details page (select Broker on the Maintain Issuance Instructions page, then click Edit Issuance Type Information).

Entering Registration Instructions for Stock Certificates

Access the Maintain Issuance Instructions - Certificate Details page (select Certificate on the Maintain Issuance Instructions page, then click Edit Issuance Type Information).

Entering and Updating Issuance Instructions for Multiple Participants

Access the Update Mass Issuance page (Stock, Issuance/Profiles, Update Mass Issuance ).

As Of Date	Enter the date that you want the mass issuance to be effective. The system displays an error message on the Review Mass Issuance Messages page if the date entered already exists in the issuance instructions for a participant or the participant has an effective-dated row greater than the as of date.
Initial Issuance	Select during implementation to generate the initial issuance instructions. The system only generates instructions for participants who don't have specific issuance instructions for the identified stock.

From

If this is an initial issuance, these fields are not available and None is selected as an issuance type.

To

Identifying Insiders

Access the Maintain Insiders page (Stock, Issuance/Profiles, Maintain Insiders).

EmplID

Click this number to view employee information.

Insider Information

Insider Status

Select all insider status types that apply to the individual. At least one type must be selected. If you select reporting person, director, or officer, the system also selects company insider. If an individual is no longer an insider, add a new effective-dated row and leave all check boxes unselected.

Specifying Daily Stock Prices

This section lists prerequisites and discusses how to:

• Enter daily stock prices.

• View FMV prices for a plan.

All companies, either public or private, must establish a fair market value (FMV) for their common stock. The various prices reported daily by the stock exchanges are indications of that value. Each company decides the price, or combination of prices, to use in calculating the FMV for the various stock transactions.

Generate the Daily Prices report to view the daily prices that you have entered for a given stock.

Prerequisites

Before you can enter daily prices, you must define:

• Stock ID on the Stock Table page.

• FMV methods on the FMV Method Table page.

• FMV method on the Stock Details - Common Rules page.

If the stock plan FMV differs from the defaults defined on the Stock Details - Common Rules page, you must further define the stock plan FMV on the Stock Option Plan Rules component for option plans and Stock Purchase Plan Rules component for stock purchase plans.

Pages Used to Enter Daily Prices and View FMV Prices

Entering Daily Stock Prices

Access the Maintain Daily Prices page (Stock, Daily Prices, Maintain Daily Prices).

Common Page Information

Daily Prices Tab

Enter the opening, high, low, and closing stock price for the day. Also enter the volume of shares traded on the exchange for this trading day. (The volume is for informational purposes only.)

Bid/Ask Tab

Enter the bid and ask price for the day.

Viewing FMV Prices for a Plan

Access the Plan FMVs page (click the Fair Market Value button on the Maintain Daily Prices page).

Option Plan, Purchase Plan	Select whether to view FMVs for the Option Plan or Purchase Plan.
FMV Date	FMV date selected from the primary page.
Stock Plan	Select from the available options.
	Click the Calculate button to display the price indicators and plan FMVs for the FMV day.

Plan FMVs

The system displays only the FMVs that relate to the stock plan and the date selected.

Calculating Stock Balances

This section provides an overview of high-level, comprehensive share balance and allocation processing, lists common elements, and discusses how to:

• Calculate stock treasury balances.

• Calculate stock class balances.

• Calculate stock options outstanding.

• Calculate stock purchase plan balances.

Understanding Comprehensive Share Balance and Allocation

As a stock administrator, you must have accurate records of the number of shares that are allocated to your treasury, stock classes, and stock plans. The intricate balance tracking and share allocation functionality of Stock Administration captures online transactions and batch processes and provides reports that you can use for financial disclosure, auditing, and regulatory reporting. When you enter an "As of Date" on the share balance inquiry pages and click the calculator button, you can see the share balances as of the date that you entered.

Once you set up your balance tables, the share accounting is derived in real time off the stock options and stock purchase transaction tables. This enables you to define effective-dated rules for the return of shares to the treasury or stock plans for transactions such as cancellations, expirations, repurchases, swaps, trades, and SAR exercises.

Treasury pool and stock plan funding follow a typical allocation process with each action altering pool and plan balances. A typical allocation flow is:

1. Fund Treasury: A company files an initial registration statement with a regulatory agency, such as the SEC, that lists the number and type of shares allocated to the treasury. Later on, a company may increase the number of shares allocated by filing appropriate documents with the SEC to create a new treasury pool or increase the allocation levels of the current pool.

2. Create Class Pools: Different pools can be created for different types of shares. For example, you may create one class pool for common shares outstanding prior to implementation and another class pool for preferred shares outstanding. The common share pool for a stock ID increases and decreases depending upon stock transactions such as exercises, purchases, swaps, trades, and repurchases.

3. Fund Stock Plans: The Board of Directors or the shareholders approves allocating shares to a stock plan from a designated treasury pool. If you use variable compensation, you can allocate shares from your stock option plan to be used by your variable compensation plan. The variable compensation allocation doesn't affect the plan balance.

4. Process Stock Plan Transactions: After the stock plan allocation, daily transactions affect plan balances. Stock option plan transactions include grants, exercises, cancellations, expirations, repurchases, sales, and releases. Stock purchase plan transactions include purchases and sales.

5. Monitor Treasury and Stock Plan Balances: All these stock plan transactions may affect the treasury pool and stock plan balances, and may affect common shares outstanding. The system needs to accurately record the effects of these transactions and to update share balances.

See Also

Administering Variable Compensation Grants

Common Elements Used in This Section

Pages Used to Calculate Stock Balances

Calculating Stock Treasury Balances

Access the Stock Treasury Balance page (Stock, Review Balances Info, Stock Treasury Balance).

Plan Shares Allocated	Plan shares allocated that decrease the treasury balance.
Class Shares Allocated	Class shares allocated that decrease the treasury balance.

Calculating Stock Class Balances

Access the Stock Class Balance page (Stock, Review Balances Info, Stock Class Balance).

Shares Exercised	Shares from active option exercises. This does not include SAR exercises.
Shares Outstanding	The sum of Class Shares Allocated, Shares Exercised, and Shares Purchased, less the Shares Swapped and Shares Repurchased.

Calculating Stock Options Outstanding

Access the Option Plan - Options Outstanding page (Stock, Review Balances Info, Option Plan, Options Outstanding).

Shares Exercised	Shares from active option exercises. This does not include SAR exercises.
Options Outstanding	Shares granted less the shares exercised, shares cancelled, and shares expired.
Shares Authorized But Unissued	The sum of Options Outstanding and Shares Available to Issue.

Calculating Stock Purchase Plan Balances

Access the Stock Purchase Plan Balance page (Stock, Review Balances Info, Stock Purchase Plan Balance).

Shares Purchased

Shares issued from active stock purchases.

Managing Stock Splits

This section provides overviews of stock split considerations and stock split processing and discusses how to define the parameters of a stock split.

Stock Split Considerations

Stock splits affect all stock shares in your stock administration system. You must split not only the outstanding stock but the outstanding stock options as well. Historic records must be split and the split must be thoroughly documented on all records.

Consider the following before you start the stock split process:

• What split ratio will you use? Companies commonly split stock in a 2 for 1 ratio. That is, for each share of stock shareholders own they receive two shares while the price for the individual shares is cut in half. Other popular ratios are 3 for 1, 3 for 2, and 5 for 4. Regardless of the ratio, the same principle holds. The stock price declines, the par value declines, and the amount of shares outstanding increases. This is not true for reverse splits.

• How are you going to handle transactions that occur between the record date and the payable date, and the record date and the process date? All FMVs and grants that occur between these dates must be adjusted to account for the stock split before you enter information into the system.

Stock Split Processing

Run the Stock Split report before and after you process a stock split. You can use these reports to reconcile your balances. You should run the Shares Granted SQR and select grants with a pending status. Then run all the SQRs for all your stock option plans and stock purchase plans. You should also run and print all balance inquiry pages just before you run the split process.

To split your stock:

1. Define the split parameters.

   Define the stock split parameters, including the stock ID, the split conversion ratio for shares and stock prices, and the record date of the split, using the Define Split page.

2. Run the Stock Split Application Engine process (ST_SPLIT_PRC).

   Run the Stock Split process using the Process Split page. You can run only stock splits with a split status of unprocessed.

Pages Used to Manage Stock Splits

Defining the Parameters of a Stock Split

Access the Define Split page (Stock, Stock Splits, Define Split).

Record Date	Enter the date on which an individual must officially own the stock to derive an adjustment resulting from a stock split or a stock dividend. Options granted after the record date are not adjusted.
Payable Date	Enter the date that the split shares will be distributed to the stockholders.

Stock Conversion

Enter the number of New Shares and Old Shares. These numbers define the conversion ratio for splitting stock shares and prices. All share fields will be multiplied by new/old. All field prices will be multiplied by old/new.

Fractional Share Rules

If fractional shares are allowed at the Stock Detail level, these fields become available and the fractional share rules defined on the Stock Details - Common Rules page are the default. You can make them more restrictive. If fractional shares are not allowed, the value in Decimal Places is 0.

Stock Price Rules

The price rounding rules defined on the Stock Details - Common Rules page are the default. You can make them more restrictive.

See Also

Defining Common Rules for Stock Option and Stock Purchase Plans

Managing Dispositions

To manage dispositions, use the Offering/Purchase Periods (ST_OFFERING_PD) component. This section lists the pages that you use to:

• Confirm dispositions that are submitted through the self service application.

• Batch confirmed dispositions and send them to Payroll for North America.

See Also

Administering Stock Option Dispositions

Administering Stock Purchase Dispositions

Pages Used to Manage Dispositions