All publicly-traded issuers have (or should have) a blackout policy that prohibits a designated individual from engaging in open-market transactions whenever such individual possesses material non-public information. But what if the issuer is always (or near always) in a blackout period? How does the issuer satisfy its income tax withholding obligation if the individual cannot finance the obligation through other means (e.g., family money, borrowings, etc.) and the individual is prohibited from financing the obligation by selling shares in the open market? Answers to these questions are discussed in this Tip of the Week (presented in NO particular order, and not intended as an exhaustive list). Continue Reading Tip of the Week: 4 Ideas to Ease Tax Obligations When Equity Awards Vest During a Blackout Period
Most publicly-traded issuers are interested in ideas that could help increase the life expectancy of the share reserve under its stockholder-approved equity incentive plan. The purpose of this “Tip of the Week” is to discuss the use of “inducement grants” as one of the many ideas to consider.
If you look at an equity incentive plan’s annual life cycle on a per-key employee basis, it is likely that the largest share grant occurred at the time the key employee was hired. That conclusion makes sense because more shares are generally granted at the time of the key employee’s hire in order to induce him or her to become employed with the issuer (compared to the number of shares it takes on an annual basis thereafter to retain that same key employee). With this point in mind, issuers could increase the life expectancy of its equity incentive plan’s share reserve if new hires received equity grants that were “outside” of the stockholder-approved equity incentive plan. Continue Reading Tip of the Week: Use Inducement Grants to Protect an Equity Plan’s Share Reserve
Publicly-traded issuers losing (or about to lose) Emerging Growth Company (“EGC”) status will have to include a CD&A within their proxy statement. Since CD&A disclosure significantly drives compensation design, issuers losing EGC status will need to consider various business points that will likely change their compensatory programs. Such business points include: (i) memorializing a compensation philosophy, (ii) establishing performance incentives that “disclose” well, (iii) discussing compensation governance mechanisms, and (iv) deciding whether to appease the thoughts from institutional shareholder advisory services such as ISS. Sound easy enough? Yes, but only if the Compensation Committee is adequately informed and has time to consider and implement any compensatory changes.
On October 11, 2018 (10:00 am Central), we are hosting a webinar entitled “Compensation Changes Due to Loss of EGC Status (Phase II of II).” The purpose of this webinar is to discuss business points that an issuer losing EGC status will need to consider with respect to its compensatory programs. Click here to register: “Compensation Changes Due to Loss of EGC Status (Phase II of II).” And as always, our monthly webinar series is FREE. Continue Reading Compensation Changes Due to Loss of EGC Status
If an employer grants one of its employees a restricted stock award, should that employee make an 83(b) election at the time the restricted stock award is granted? What is the upside to the employee if he or she makes an 83(b) election? What are the risks to the employee? The answers to those questions are this “Tip of the Week.” Continue Reading Tip of the Week: Pros and Cons of Making an 83(b) Election
On September 13, 2018, the SEC withdrew two no-action letters issued in 2004 to two proxy advisory firms. Some folks (like me!) are hopeful that the withdrawal of these no-action letters is a first step (albeit a small step) towards proxy advisory firm reform. If you would like to learn more about this topic, please see our Firm’s client alert entitled “Proxy Advisory Firm Guidance Withdrawn by the SEC,” which our Firm published this morning. Continue Reading Possible Small Step Towards Proxy Advisory Firm Reform?
Tomorrow I am speaking on “Trends in Designing Performance-Based Equity Awards” at the HC&B Total Rewards Summit in Houston, Texas. Discussion points include: (i) applicable forms of equity incentives conducive to performance-based awards, (ii) the more common performance metrics used to drive behavior, (iii) typical payout levels and performance periods, (iv) total shareholder return formulas, (v) administrative issues associated with accelerated vesting provisions upon retirement, (vi) maximizing capital gains with 83(b) elections, and (vii) recent revisions to Section 162(m) and the likely impact upon performance-based designs. Hope to see you there! Continue Reading HC&B Total Rewards Summit
Though relative Total Shareholder Return (“TSR”) programs offer no direct line of sight for the executive to chase the business goal, such programs continue to remain the most common metric within an issuer’s performance-based equity program. In designing these programs, a common question is how payouts could be adjusted if the issuer’s stockholders realize negative returns and lose money during the measurement period. The answer to that question is this “Tip of the Week.” Continue Reading Tip of the Week: Addressing Negative Returns in a Relative Total Shareholder Return Program
We previously posted on grandfather treatment under the Tax Cuts and Jobs Act (the “Act”), as clarified by Notice 2018-68. This post is an extension of our prior post and is intended to highlight that an issuer’s PFO is subject to a slightly different analysis with respect to Grandfather Treatment (defined below). Continue Reading Different Grandfather Analysis Applies to PFOs under Section 162(m) and Notice 2018-68
Determining the “date of grant” of an equity award is important if the issuer desires accurate accounting charges and compliance with applicable tax laws. Though such determination is typically straight forward, there are three common situations where identifying the date of grant could become more complex. Addressing these three factual scenarios is this “Tip of the Week.” Continue Reading Tip of the Week: Determining the Grant Date of Equity Awards
Privately-held companies anticipating an IPO have a unique “one-time” opportunity to design their compensatory programs in a way that creates flexibility after the company becomes publicly-traded. Please join us on September 13, 2018, at 10:00 CT where we will discuss various design structures, including: (i) emerging growth company considerations relevant to compensation structures, (ii) thoughts from institutional shareholders, (iii) equity incentive plan designs that can help to preserve the share reserve of the equity plan long after the effectiveness of the S-1 registration statement, (iv) design issues with respect to executive contracts, and (v) other compensatory issues (e.g., co-registration rights, rollover of profits interests, etc.). Click here to register: Planning for an IPO: Compensation Considerations (Phase I of II). And as always, our monthly webinar series is FREE. Continue Reading Planning for an IPO: Compensation Considerations