Global Executive Compensation: Control, Compliance, and Consistency

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Annie: Hello, everyone, and welcome to today's webinar, "Global Executive Compensation Control, Compliance, and Consistency." My name is Annie Triboletti. I will be your moderator kicking things off today.

So joining us today is Will Hutton. Will is the Market Leader for Executive Compensation Services at CSC. So with that, I would like to welcome Will.

Will: Thanks so much, Annie, and, yeah, great to be here. So just to give myself a quick intro and who exactly I am, I am based in London, with a background in plan administration and execution. I've worked with companies in the UK, across Europe, and in the U.S., in both public and private markets, specializing in the equity fund administration and also deferred compensation as well.

So I think that the plan today is we want to give you guys a full overview of CSC, as a business, as a group. And then we'll take a look at some of the challenges within incentive plan administration, and then do a little bit of a deeper dive into our Executive Compensation Services offering, where we may be able to help.

So just a quick note on CSC as a group, we are the business behind the business. We provide fully-outsourced administrative, strategic and compliance solutions globally. That's spans fund solutions, corporate and legal services, digital brand services, capital markets, and SPV provision. And you'll see on the slide, we're a trusted partner across more than 90% of the Fortune 500, and we're across 140 jurisdictions globally. So we really have that global presence.

Just a quick look at those kind of high-level numbers, we service over $1 trillion worth of assets. I think we're about 9,000 employees strong now, across 69 locations. And we're currently servicing over 18,000 SPVs, 1.5 million corporate entities served. And again, just to touch on the jurisdictional reach, we're at 140 plus, so hopefully we cover the jurisdictions that you have requirements in.

To put this into just an image, you can see here this is our span across globally. Those countries in gray just means to say we haven't got a presence there. We can service various companies, which will require different requirements in those jurisdictions as well.

Then just go into a little bit of detail in what we do, you'll see a lot of our business, we've got business administration and compliance functions. We effectively have our corporate and legal solutions, and then we have our global financial services solutions. We help a lot on transactions, whether that's a firm looking to spin up an SPV or help with capital markets and debt raising and things like that.

But today, as we know, we're going to focus on Executive Compensation Services. And our business unit, we act as a bit of a cornerstone across the group. The reason being is because we can service pretty much any client of any profile, providing they offer incentives, whether that's on the administration side or the SPV side. So we deal internally a lot with our colleagues across different functions because there's also a lot of synergies with our existing client base across the group.

So firstly, just to level set on ECS, so Exec Comp Services, and what are the problems we're solving, I think it's fair to say across the world of incentive administration, there's not a perfect solution because it's such a complex world. And I like to kind of break this down into three pillars. There's the legal frameworks. There's the actual administration of these plans. And then there's also the execution of these assets, which many people forget when we talk about incentive plan administration.

So firstly, from the regulatory side, to start with, there are plan rules, different plan rules. There are tax-approved plans across different jurisdictions. There are different vesting schedules, performance, etc. So the kind of legal framework just purely on equity funds, as a starting point, is pretty complex. And the idea around this offering is we work with you and your legal advisors, and we effectively make those plans happen.

The other part of the regulatory kind of structure is there are different remuneration codes, specifically in the FX segment, say if you look at IFPR and MIFIDPRU, etc. You've also got the AFIM and UCITS remuneration codes. And you can see how it gets pretty complex pretty quickly in terms of deferrals, clawbacks, different instruments are used, but then specifically on the reporting and disclosure requirements across these different regulatory environments.

The second point on the legal is the jurisdictional complexity. The way that plans are structured can impact tax obligations, tax crystallization points, holding periods, etc. So that really adds a layer of complexity to the way these plans are written up.

And then thirdly, how the SPV is structured. So independent fiduciary arrangements to pool and own and hold shares, hedging solutions, share dilution, and capital management, they're very different in different jurisdictions. And that, again, adds another layer of complexity.

And I think just to kind of hit home on this legal point is these are not mutually exclusive. So effectively you can have employees in different jurisdictions that sit across different remuneration codes. So you can see how the reporting of such employee-based and incentive plans gets complex.

And this leads me on to the second point is how do you administer this? So I think the clear observation I would say in the market is there's some old technology flying around. I think maybe historically the technology hasn't been updated as much as it should have been due to the legal complexity of such plans. So I think, out there, there's a real lack of new technology.

Some firms will talk about we've had years of experience, we've built this platform over a long period of time. But I think my opinion is contrasting with that, and I think newer tech is generally better. The reason being it's got a clearer tech stack. It's more flexible. And also, there are things like embedded AI, etc. that makes new tech a lot more attractive, I think, going forward. Also, with the kind of evolving regulatory frameworks, this new tech should hopefully be able to keep up with it from a regulatory standpoint.

So that is a really complex plan administration and SPV expertise. It's okay having technology, but ultimately technology isn't going to solve all the problems. So from that point, you really need a team that are going to be able to understand plans. I'm lucky. I've been on the administration side my kind of whole career. So I've seen a lot. However, in-house teams, it can be difficult sometimes if you're working in just kind of a subset of jurisdictions and a new one comes up. You sometimes need to rely on your administrator to figure out how these things happen.

And that leads me on to the kind of final point and the execution. Whether it's custody or tax filings or disclosures, this gets pretty complex pretty quickly. And from an administration perspective, we effectively take on that burden. Ideally, we can kind of protect the issuers or these companies giving these plans from that complexity, whether it's holding assets, holding different instruments, holding cash, or just kind of vanilla cash disbursements how does that work. There are various jurisdictions where this can become really challenging.

So I think, to summarize, there are the kind of three pillars that we aim to solve, and why at CSC we're really trying to address clients' needs in all three areas.

So Executive Compensation Services, who are we, and I like to say what's on the menu, what can we do? How can we solve all of those problems that many firms are facing? And I think the easiest way to portray our suite of offerings is to split it in two.

We have an SPV side of the business, which effectively is establishment and administration of the vehicles that will hold your plan assets. So whether that's you require an employee benefit trust to hold equity to satisfy a future plan, future equity plans, or it's a corporate nominee service to allow your participants to hold shares, or also on a deferred compensation plan if you require a fully-funded plan to execute, then we can hold that in a nominee structure and then provide the execution services, the purchasing and sales of fund units, etc. on that side.

There are also other areas of the business. We are acting as trustee on various global pension plans. We've got a DFSA-regulated offering in the UAE, which is an end-of-service gratuity scheme. Also, there are others kind of vehicles. Just to mention, you've got Lux partnerships, you've got Singapore COEs, etc. So the idea is that whichever jurisdiction you require a vehicle in as part of your plan administration, we hope we can provide it.

Then to switch over to the administration side of the business. So the key point here is that we have capabilities to cater for all incentive plan types, whether that's an equity plan in a private or public company, a deferred compensation plan, i.e., mandatory bonus deferral into funds, carried interest funds, and pensions and savings. And with our work with Ledgy as our tech provider, we can provide all of this on one platform, as well as deep expertise within our teams to help administer these plans.

So for example, if you were running both an equity plan and a deferred compensation plan, you could have it all on one platform, in one place. Your employees could see it in one place. But also, we'd be able to provide the service around that, whether it's deep expertise in an equity plan or it's deep expertise in how we execute bonus deferrals into funds. We provide that from a corporate standpoint.

So yeah, there's just a list here on the kind of asset classes. I mentioned public and private equities. Hedge funds and private credit. Effectively, we can help service whichever area you sit and your company works in. We hope that we can provide a real bespoke incentive administration offering for you.

So I've given an overview of what products and services we can provide in Executive Compensation Services. But just to kind of dive into a little bit of how do we support. So first things first is the service. So it's a fully outsourced service. I mentioned the platform that we've got with all incentive vehicles on there. However, we've got individual teams that have deep expertise at plan level. So whether it's a private company equity plan, a public company equity plan, a deferred compensation plan, a large carried interest plan, we have teams that will service these plans for you on the platform.

So first things first is just to mention it's a fully outsourced offering. So that governance and oversight is effectively given to us, and we would effectively make your plans. We turn them into operational reality. That goes one step further as well. We also provide support to your employee base. So whether they've got questions on platform, on plans, etc., we can have Q&A. We can also provide that employee support to basically stop the traffic coming through the reward and HR or finance teams on these specific plans.

The next thing is the technology. I mentioned already, but the fact is that all of this plan administration is on the same platform. So we don't expect you to have to learn the platform and learn the configurations. We give you access to the things you want to see. So do you want to be able to view employee accounts? Do you want to be able to pull reports down? The rest of the kind of administration is done by our teams. Most clients in our scenario, in our case like our teams to run the reports for them or schedule reports, etc. But the point to make is the technology, it's a global platform. You can log in from anywhere, and you can also pull down data, providing you have access at corporate level.

That links onto the global coverage. Like I said, as a group, we're in many jurisdictions around the world. The Executive Compensation Services, we've got experience across global plans, as well as a platform and team that can deal with those plans. However, if you're looking at new jurisdictions and you'd like to be introduced to advisors and things, the point is we've got presence in a lot of jurisdictions that we can help you kind of roll out your incentive plans accordingly.

Finally, just to mention, within Executive Compensation Services specifically, we have over 400 happy clients. We've got a very high NPS rating. I forgot it, forgive me. But the point is we pride ourselves on that service and expertise element, alongside our kind of full suite of offerings that we can provide a corpus of varying profiles.

Which leads me on to the next slide. It's like I planned it before. So just to kind of give you an overview of our clients, it's very broad because we can effectively service pretty much any client that offers incentives. So whether you're a global listed corporate, you're a private company, whether you're a startup or a pre-IPO company, you're a financial institution, or a private equity firm, asset manager firms are in there, we can pretty much service all of your plan types that you would likely offer.

So just to give some examples, I saw a listed firm last week that we already provide them with a group equity SPV, and we do some work for their portfolio companies. But the offering was, the discussion was we can help them further on the portfolio level, or we can expand that to their group equity plan administration or their group carried interest plans, etc.

So the idea is that we hope we can help. Whichever your requirements, please feel free to get in touch and have that conversation to see where we can hopefully make your lives easier.

So just a quick note on the platform, powered by our great partners at Ledgy. So a couple of key features, this platform is integrated with Docusign, so that hopefully we would work with you and your advisors for those legal documents that you require. We can put them in the system and then integrate them into grants and plans, etc. so your employees can sign on there. There's also signing ability. So if other members of the company, as well as the receiving participant, require signing, then we can send it to them at the same time as well.

And off the back of that, the platform acts as a document storage for both the employee and the corporate. So you can see all documents that have gone through the system.

Other things to mention, single sign-on, 2FA, API integration. And effectively, the main thing from the employee side is they've got 24/7 access to plan data. And what we mean by that is at any point they can log in and they can see what plans they've got. If you decide to provide valuations, we have feeds that feed into the system so their overview of what they've got is accurate as of the latest valuation figures.

Another thing just to call out, we've recently done a survey on the future of financial rewards in financial services. We went out to 300 or so companies across multiple jurisdictions to talk about what plans they're running, what challenges they're coming across, what they might look to do in the future, how they react to regulation. But please feel free to reach out if you'd like to receive a copy of this. Or any comments from our side, yeah, reach out.