Accenture Managing directors have rules for equity ownership to ensure their leadership is properly invested in the company.
The requirements start when employees are promoted to Managing Director, starting at L4. They continue through the MD levels, all the way to the C level.
If you think your requirements as an L3 or L4 or high, just know the Accenture executive officers (C-suite) are required to hold six times their base compensation by the fifth year of their promotion!
Luckily, the rules for L3/L4 Managing Directors aren’t so high.
Accenture MD rules for equity ownership
Here are requirements for equity ownership at each level of Managing Director:
- L4 MD: 50% of base salary
- L3 MD: 100% of base salary
- L2 MD: 150% of base salary
- Senior MD: 200% of base salary
Five-year requirement timeline
First, we need to figure out when requirements take effect. As mentioned earlier, you need to meet the requirements five years after your promotion date.
If you were promoted on December 1st, 2019, your equity requirements start on December 1st, 2024.
Oftentimes, MDs will get promoted within five years of their first L4 promotion, so their 50% equity retirement remains due five years after their L4 promotion, but the 100% requirement is due in five more years.
This means there could be just a couple of years difference between jumping from 50% to 100% equity ownership requirement.
The planning gets much more important at this point.
How is the equity requirement calculated?
The next step to determine your equity requirement is to determine the actual amount.
Accenture calculates the Fair Market Value (FMV) on January 31st by taking the stock price average from each trading day over the previous six months.
Once this FMV is calculated on January 31st, it remains in effect for the entire calendar year.
The equity requirement is calculated as follows:
((Base salary X level multiple (50%, 100%, etc)) / FMV as of January 31st
This calculation yields the number of shares you need to own by your promotion date plus five years.
We’ll get into an example below, but first, let’s understand what counts toward your equity requirements.
What counts towards MD equity requirements?
First, let’s review the type of equity that counts towards your requirements. They include:
- Vested and unvested RSUs
- Vested and unvested share options
- Shares acquired through ESPP
- Founders shares
The biggest relief is that unvested equity counts towards these requirements. If you max out your VEIP and consider equity awards and the MD grant, you’ll have quite a bit of unvested equity.
Allowing unvested equity to count as ownership is significant because most L4 MDs will be covered by the unvested equity of their MD grant combined with equity and VEIP RSU grants.
The other important item to remember is that shares must be held in a brokerage account established by Accenture. You can’t make up a shortfall by buying shares on the open market; it all needs to stay in the Accenture holdings programs.
For example, ESPP shares must stay in the Morgan Stanley account, and VEIP shares must stay in the UBS account to remain eligible.
Additionally, the shares must remain in the employee’s name or an approved personal holding company (e.g., an LLC).
While this is quite complicated to calculate and manage, the good news is the MyHoldings Accenture site includes the minimum equity ownership requirement and the total shares you own.
Case Study: MD equity ownership
Let’s walk through an example to show stock ownership requirements for Accenture MDs. In the scenario below, Rachel was promoted to Managing Director on December 1st, 2020.
Her promotion starts the clock on her first ownership requirement, 50% of base compensation within five years of promotion.
As the promotion starts December 1, 2020, she needs to have her 50% equity by December 1, 2025.
Let’s assume her salary in 2025 has increased to $470,000
To determine her equity requirements, the Fair Market Value (FMV) is calculated on January 31st, 2025, by taking the average stock price of the previous six months.
Let’s say the FMV was $300/share. Her requirement is as follows:
($470,000 (base salary in 2025) * 50% (L4 equity requirement)) / $300 (FMV) = 783 shares
The calculation yields the number of shares required to meet the equity requirement.
Now we can look at the number of shares currently build up in unvested RSU grants from equity awards and the VEIP.
Although the MD equity grant vests just a month after the start of the requirement, so the full number of shares counts, after it vests, you’ll lose a large chunk of these shares to taxes.
As mentioned above, Accenture tracks all of this for you on the MyHoldings Accenture page and updates the number of required shares on January 31st of each year.
Consequences of not meeting equity requirements
If you don’t meet your equity requirement, you become “non-compliant” with the policy.
This non-compliance is noted and considered during the annual process and could impact promotions and raises.
The Accenture equity ownership requirements attempt to align MD interests with the rest of the shareholders.
While it’s another thing for you to think about, in theory, it will help motivate MDs to maximize Accenture’s performance and get rewarded for doing so.
Even though you’re required to hold a certain amount of equity, you should consider if you should own Accenture shares on top of that.