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Within the gaming industry stock options form a core part of many employees’ remuneration package. We explore how to optimise awards for employees, and the pitfalls to be aware of.

Optimising option plans

Stock options align employees’ interests with those of the company and its shareholders. As the company grows and succeeds, so does the value of the stock options, which can lead to increased employee motivation and productivity, and act as an important tool for retention and recruitment.

Designing a plan that is adapted to your business is crucial.

World building – who to grant options to, and when

There is often an expectation that stock awards will form part of the overall compensation package. Therefore, while most option plans are discretionary, businesses should carefully consider their expectations of key stakeholders, such as employees and investors.

Internal policies and guidelines can be adopted to simplify the process. For example creating annual or bi-annual grant windows and having clear parameters on the available equity pool (both for current and future hires). Flexibility is recommended where possible, to allow for fast decisions when needed, such as for senior hires.

Main quest – what exercise conditions to attach?

These are the conditions that must be satisfied for employees to exercise options and acquire shares. Common examples include:-

• Time-based.
• Performance-related.
• Exit-only.
• Any combination of the above.

There are no right or wrong answers. Ultimately, vesting conditions should be tied to the behaviours the company wants to incentivise, be it recruitment, retention, or meeting specific objectives. In our experience, simplicity and effective communication of objectives is key.

The map – global workforce

Companies should consider the benefits (and possible downsides) of tailoring plans for a global workforce.

Many countries offer tax-advantaged arrangements which offer strong incentives by maximising gains. Tailoring share plans to meet the qualifying conditions for these arrangements is usually possible via local subplans, however this can be cost-prohibitive on a global basis. Often, international plans will offer a more tailored approach in more business-critical localities.

Local advice is always recommended to avoid any surprises.

Are there alternatives to stock options?

Stock options are one form of equity-based incentive, however numerous alternatives are possible. Suitable structures will be subject to the specific circumstances of a business, its corporate structure, location of key personnel, and core objectives.

For more information, please get in touch with Kerrie Willis or your usual 91̽»¨contact.