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Why Partner with an LSP For Financial Translation Services
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Most of us have seen spots in NBC’s “The More You Know” campaign. It’s one of the longest running, most storied PSA’s in television history. It has been used to promote a variety of different, distinct educational messages.
(Localization nerd alert: The sister campaign on Telemundo is called “El Poder de Saber” – the Power of Knowing. This is yet another instance in which it’s worthwhile to spend as much time working to localize the intent of a phrase as it is to translate it literally. Seemingly subtle differences matter!)
Today’s economy requires a global presence in order to attract top talent. Even something as technical and common as equity compensation requires a focused localization strategy.
At Glyph, we believe that the more your translation partner knows about a particular market and vertical, the more powerful and effective your translation and localization work will be. That’s one reason why we have carefully worked to cultivate expertise across a variety of fields (training, eLearning, HR, financial services, and software/apps to name a few).
Why does it matter if your agency or partner truly understands what you do? Here’s an example from the financial translation services sector. It should show you why having expertise in both your business and your target market makes a difference.
Equity Compensation for Global Companies
Granting employees, officers, and directors equity-based compensation is common among US businesses. In cases where a company does not have a ready store of cash on hand to hire top talent or in situations where management wishes to incentivize performance, equity-based incentive compensation is often a significant part of the total compensation package.
To give you an idea of how complex equity compensation is in the US alone, consider that equity incentive packages can include:
- Stock options (qualified and non-qualified)
- Restricted stock
- Restricted stock units
- Performance-based stock shares
- Stock shares
- Stock appreciation rights
- Purchase rights under an employee stock purchase plan (qualified and non-qualified)
Each of these forms of equity compensation is subtly, but importantly, different from the others. Moreover, each carries distinct tax consequences for the employee, officer, or director receiving them. Explaining how your company’s plan works in clear language, while also providing the necessary regulatory information requires legal and financial advice, and no US company would consider putting such a plan together without some hefty consultation.
Now, imagine what transpires when a typical US company goes global and takes its equity compensation plan with it. When opening a foreign subsidiary or simply compensating employees in international markets, it’s typical for a company to compile a list of key documents and corporate assets that need translation and localization and then seek to have these documents “translated”. In extreme cases, they seek only to have a broad plan description translated. Then, they trust in the employees’ command of English to help them decipher the “fine print” in the main plan documents.
If you fob this list off on an agency without giving thought to whether or not that agency has expertise in the different, specific markets you’ll be entering as well as expertise in the different types of translation and localization work you’ll be doing, you could be in for trouble.
Factors That Go into Porting Your Equity Compensation Plan Abroad
1. While your plan may offer great incentives at home, these incentives may not be clear to foreign employees.
In the US, “restricted stock” awards are increasingly common. (“Restricted stock” awards are nontransferable shares of employer stock that are subject to forfeiture unless certain service or performance requirements are met.) In the US, these awards are taxable at the time of vesting. This allows the employee to hold the restricted stock without tax consequences until they meet performance conditions.
In other countries, these types of awards are much less common and may even be taxed at the time of the grant rather than when fully vested. While your legal and financial teams are responsible for helping you navigate the best option to use in a foreign market, your localization team’s experience can help you understand how best to explain what may be unfamiliar and highly complex topics in markets where they are not frequently encountered.
2. US regulations still apply to foreign markets – but require different documents.
While your legal team will tell you if your foreign equity plan needs to be registered in the countries you are entering, any US-based company that offers stock options or employee purchase plans needs to register those plans under the Securities Act of 1933. Part of this Act mandates that all such plans include a description of any local tax consequences for the plan. This means you’ll need separate inserts for employees in each of the different countries where your plan is offered.
3. Work culture can require more engaged communication in foreign markets.
While just about any college-bound student has heard the term “stock option” and (at the very least) understands that having them with the right company at the right time can make them very rich, there are many countries where equity compensation is rare. As a result, employees there treat such plans with suspicion. In these cases, you will need a knowledgeable localization and financial services translation partner who can bridge the gap between our casual and ubiquitous understanding of various types of non-cash compensation and relevant ideas in the target locale.
You will want a clear and thoughtful communication plan that outlines the benefits of any unfamiliar types of compensation in the target language. This will mean that, at the very least, you’ll need to create explanatory documents to accompany your expertly translated plan summaries, offer letters and tax information in addition to the raft of plan documents, award agreements and enrollment forms. You will also want to be sure that your interface and site offers localized options and copy if your foreign employees will be accessing plan data and balances online.
Obviously, you don’t need a translation firm full of international lawyers and accountants. Nor do you need a firm that has experience with every market’s regulatory nuances. What you do need is a partner who understands the type of work you are doing and what the likely challenges will be in localizing it to a new country. Hiring experts with relevant knowledge and experience helps make your introduction to a new market both effective and cost-efficient.
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