[Guidance Overview] Backdating Stock Options Still a Risky Play
"The U.S. Court of Appeals for the Ninth Circuit agreed with a district court ... that the former CFO of semiconductor concern Maxim Integrated Products ... would be on the hook for backdating stock options without expensing them. The case is notable for two reasons: it has been one of the few times that an options-backdating case actually went to trial, and it shows that CFOs and chief executives have no way to hide from improper expensing, even years later." (CFO)
Employee Ownership Update for April 16, 2012
NCEO Executive Director Loren Rodgers discusses new employee ownership fellowships at Rutgers University, two films on employee ownership, the Certified Equity Professional (CEP) exam, a new CEO at SAIC, and the OEOC conference. (National Center for Employee Ownership)
In Chief Executives' Pay, a Rich Game of Thrones
"IS any C.E.O. worth $1 million a day? That's roughly $42,000 an hour. Or $700 a minute. Or $12 a second.... At Apple, the answer to that question is an emphatic yes, and then some.... [Timothy D. Cook] was paid a cash salary of roughly $900,000 in 2011. On its own, that would have been a ho-hum paycheck for a top American C.E.O. in recent years. But then came a wild extra, a one-time award, in the form of Apple stock. It was initially worth a staggering $376.2 million. As of the end of last week, it was valued at roughly $634 million[.]" (The New York Times; free registration required)
Employee Ownership Update for April 2, 2012
NCEO Executive Director Loren Rodgers discusses new initiatives from the Mondragon Cooperative Corporation, the Secretary of Labor"s comments on re-proposing the DOL's fiduciary rule, UK proposals on options and employee ownership, Deloitte's global share plan survey, low awareness of company facts among U.S. workers, and new employee ownership fellowships at Rutgers. (National Center for Employee Ownership)
The New ESOP Executive Compensation and Private Company Equity Compensation Surveys
For ESOP companies and private companies with equity plans, relevant, affordable compensation data is often difficult to find, and it may be available only for particular industries. Such industry surveys may not address the unique issues that employee ownership companies face. The NCEO 2011 surveys of executive compensation in ESOP companies and of equity compensation in private companies fill this gap. This issue brief summarizes the results, including illustrative graphs and tables. (National Center for Employee Ownership)
[Guidance Overview] Avoid Tax Return Mistakes with Stock Options and ESPPs: What You Need to Know in 2012
"This tax return season has the potential to be more confusing than most if you sold stock last year. You must now file the new IRS Form 8949 along with the revised Schedule D. This change stems from the expansion of the information that brokers must report on IRS Form 1099-B. This article from myStockOptions.com has tips on these and other crucial tax return topics." (myStockOptions)
Ensure your Plan Participants are Prepared for a Secure Retirement
Defined Contribution Conference, March 11-13, in Miami. Learn from your peers through presentations and discussions on plan design, communications, investment options and more. FREE registration for qualified plan sponsors. (Pensions & Investments)
New Edition of the Stock Options Book
The NCEO has just released the 13th edition of The Stock Options Book. This detailed reference has been fully updated throughout and covers the latest developments in equity compensation, including the Dodd-Frank Act and Section 6039 reporting. (National Center for Employee Ownership (NCEO))
New Edition of Selected Issues in Equity Compensation
The NCEO has just released the ninth edition of Selected Issues in Equity Compensation, which discusses issues such as securities laws, IPOs, handing death and divorce, and more. The book has been revised for 2012 and features a new, updated chapter on repricing underwater options. (National Center for Employee Ownership (NCEO))
New Edition of Accounting for Equity Compensation
The NCEO has just released the ninth edition of Accounting for Equity Compensation, which has been updated for 2012. Written in plain English for non-accountants, this book is a survival guide for understanding the impact of stock compensation on corporate financial statements. (National Center for Employee Ownership (NCEO))
New Edition of Equity Alternatives: Restricted Stock, Performance Awards, Phantom Stock, Stock Appreciation Rights, and More
The NCEO has just released the 10th edition of Equity Alternatives: Restricted Stock, Performance Awards, Phantom Stock, SARs, and More (formerly titled Beyond Stock Options). The book has been updated for 2012 and combines a detailed discussion of each plan type with sample plans (included on the accompanying CD). (National Center for Employee Ownership (NCEO))
New Edition of Securities Sources for Equity Compensation
The NCEO has just released the 2012 edition of Securities Sources for Equity Compensation, which collects relevant source documents for the study of equity compensation. (National Center for Employee Ownership (NCEO))
2011 Data on ESOP Executive Compensation (Employee Ownership Report excerpt)
The featured excerpt from the March-April 2012 Employee Ownership Report summarizes the results of the NCEO's 2011 ESOP Executive Compensation Survey. (National Center for Employee Ownership)
Litigation Over Unexercised Options that Expired
"Regardless of the outcome of [recent] cases, the moral(s) of the story for companies are as follows: (1) Address option expiration issues and blackout period in the plan or award agreement. Even Code Section 409A allows an option period to be extended during a blackout period. (2) Clearly communicate the expiration and other terms of equity awards with terminating employees. (3) Take extra care in drafting the plan and agreement terms governing employment termination, vesting, forfeiture and expiration." (Winston & Strawn LLP)
Kodak Employee Sues Company Directors Over Stock
"[The plaintiff, an Eastman Kodak employee,] said in the lawsuit, which seeks class-action status, that the directors and officials did not disclose to stock-plan participants complete information about Kodak's dire financial condition and kept its investments in the company's equity when it was no longer prudent." (Reuters via the New York Times; free registration required)
[Guidance Overview] Reminder of ISO and ESPP Reporting Deadlines
"This is a reminder to companies issuing incentive stock options and sponsoring employee stock purchase plans about the January 31 deadline to report certain information to participants and the February 28 deadline to file returns with the IRS." (McKenna Long & Aldridge LLP)
The State of Broad-Based Employee Ownership Plans 2012
This report details the extent and growth of employee ownership through ESOPs, 401(k) plans, stock options, ESPPs, and other vehicles; summarizes the leading research on employee ownership and corporate performance; and discusses current challenges and prospects. (National Center for Employee Ownership)
[Guidance Overview] Annual Reporting Requirements for Incentive Stock Options and Employee Stock Purchase Plans
"With respect to reporting ESPP transactions, companies are required to report the first transfer of legal title to any share purchased under an ESPP plan." (Orrick, Herrington & Sutcliffe LLP)
[Guidance Overview] 2012 Deadlines Approach to Furnish Incentive Stock Option and Employee Stock Purchase Plan Information Statements and Returns
"In addition to the employee information statements, corporations must file returns with the Internal Revenue Service on Forms 3921 and 3922 no later than February 28, 2012, if filed on paper, or April 2, 2012, if filed electronically." (DLA Piper)
[Guidance Overview] Tax Reporting Deadline Rapidly Approaching for Incentive Stock Options and Employee Stock Purchase Rights
"While these filings are required only once per year, please note that each Form 3921/3922 may report only one transaction. As a result, employers may need to prepare multiple forms for a single employee." (Jones Day)
[Guidance Overview] Incentive Stock Options and Employee Stock Purchase Plans: IRS Information Statements and Information Returns under Section 6039
"For incentive stock option exercises and transfers of stock acquired under employee stock purchase plans in 2011, the employer must furnish employee information statements no later than January 31, 2012 and must file information returns with the IRS no later than February 28, 2012 (or March 31, 2012 if filing electronically)." (Cooley LLP)
Employee Ownership Update for January 2, 2012
NCEO Executive Director Loren Rodgers discusses Berkshire Hathaway's purchase of an employee-owned newspaper, stock options in India, a new ESPP reference, the NCEO's executive compensation survey, spreading the word on employee ownership, and NCEO board elections. (National Center for Employee Ownership)
Tax Benefits from Options as Windfall for Businesses
"The stock market's rebound from the financial crisis three years ago has created a potential windfall for hundreds of executives who were granted unusually large packages of stock options shortly after the market collapsed." (The New York Times; free registration required)
Results from the NCEO Private Company Equity Compensation Survey
In this featured article from the Employee Ownership Report (available through mid-February 2012, when it will be replaced by another excerpt), the NCEO discusses the results of its private company equity compensation survey. (National Center for Employee Ownership)
Issue Brief on Equity Compensation Values and Valuation
This issue brief features three articles by leading authorities on issues related to equity compensation valuation: private company liquidity programs, SEC simplified method transition considerations, and forfeiture rates under ASC 718. (National Center for Employee Ownership)
Employee Ownership Update for December 15, 2011
NCEO Executive Director Loren Rodgers discusses a SEC suit alleging an undervalued stock buyback, new data showing broad-based options decrease employee turnover, employee ownership in South Africa, the Penn program for ESOP company CEOs, and deadlines for the NCEO executive compensation survey and board nominations. (National Center for Employee Ownership)
Equity Compensation Report for November 2011
This is the last of the three introductory issues of the NCEO's new equity compensation newsletter; starting in December, it will be available only to NCEO members. It features an interview with Dan Walter and articles on the NCEO's private company equity compensation survey, determining whether secondary markets are right for your company, and communicating valuation. (National Center for Employee Ownership)
Highlights of NCEO's 2011 Private Company Equity Compensation Survey
Earlier this year, the NCEO conducted a pathbreaking survey of equity compensation practices at hundreds of private companies. This page presents the highlights of the results, from the demographics of the respondents to the distribution of equity at their companies. (National Center for Employee Ownership)
Results of HayGroup 2011 Executive Retirement Benefits & Perquisites Survey (PDF)
"The impact of 409A may account for the relatively static prevalence of these types of arrangements. In addition, the restrictions placed on deferral elections and payment timing may have diminished the attractiveness of these types of programs. Participation in NQDC programs is on average 39%." (HayGroup)
Employee Ownership Update for November 1, 2011
NCEO Executive Director Loren Rodgers discusses the NCEO's new survey of equity compensation in private companies, Mitt Romney and ESOPs, new research on ESOP trends, and more. (National Center for Employee Ownership)
New Edition of The Decision-Maker's Guide to Equity Compensation
The revised and expanded second edition of this popular book updates the existing chapters and adds new ones on performance awards and on equity compensation in LLCs. (National Center for Employee Ownership)
2011 Private Company Equity Compensation Survey Results
There are many equity compensation surveys for public companies, but almost none for closely held companies, and these focus just on executive equity in single industries or pre-IPO companies. The NCEO Private Company Equity Survey fills this gap. It is based on 201 completed surveys from private companies with equity plans and 32 responses from service providers in a separate survey designed to corroborate the broader survey results. (National Center for Employee Ownership (NCEO))
Equity Compensation Report for October 2011
The October 2011 Equity Compensation Report features articles on valuation issues in closely held companies, best practices for capitalization reporting, an interview with Anne Claire Broughton of the Social Jobs Venture Fund, and more. (National Center for Employee Ownership)
Stock Options vs. Restricted Stock vs. RSUs
"For stock options, the wild volatility of the past 3 years may mean a higher FAS/ASC compensation expense than in previous years, thus decreasing their attractiveness to the company." (Michael S. Melbinger via Winston & Strawn LLP)
[Guidance Overview] Noncompete As Condition for Option Exercise in Texas
"Distancing itself from earlier precedent, the Supreme Court of Texasrecently concluded that an employer could require an employee to give acovenant not to compete in exchange for allowing the employee to exercise stock options, if the noncompete were reasonable as to time, scope of activity, and geographical area." (Utz, Miller & Eickman, LLC)
The Equity Compensation Report
The NCEO has launched a newsletter focusing on equity compensation issues for companies with broad-based plans and closely held companies. The first three issues will be available at no charge to everyone through November. (National Center for Employee Ownership)
Employee Ownership Update for September 1
NCEO Executive Director Loren Rodgers discusses employee ownership and the development of human capital, the spread of employee stock options in India, new resources for NCEO members on ESOPs and related matters, the National Equity Compensation Forum, and a survey of equity compensation behavior. (National Center for Employee Ownership)
The Practice of Upward Stock Option Repricing
"[A]ffected employees must be allowed to elect whether to accept the repricing offer. If they do not accept the offer, the options remain discount options. While accepting the repricing offer provides the employees the tax benefits accorded to ISOs, it does not necessarily maximize their future payoffs from the options because of the increase in the exercise price." (American Institute of Certified Public Accountants)
[Guidance Overview] Treasury Proposed Clarification of Performance-Based Compensation Exception Under the $1 Million Deduction Limitation (PDF)
"The proposed regulations make clear that the performance plan must state the maximum number of options or rights for each individual and that the special transition rule applies only to compensation received pursuant to a stock option, SAR, or restricted stock award. The special transition rule does not apply to restricted stock units and phantom stock." (Buck Consultants, LLC)
Senators Introduce Bill to End Stock Option Tax Break
"A . . . press release said the Ending Excessive Corporate Deductions for Stock Options Act, S. 1375, would end excessive corporate tax deductions for stock options by requiring such deductions not to exceed the expense shown on corporate financial reports filed with the Securities and Exchange Commission." (PLANSPONSOR.COM)
Employee Ownership Update for August 1, 2011
NCEO Executive Director Loren Rodgers discusses a funding reduction for OEOC, a survey on private company equity compensation practices, a bill that would increase taxes on stock options, Twitter's plan to use private financing to buy employee shares, a revised ESOP worksheet from the IRS, and a new video of NCEO board chair Victor Aspengren on YouTube. (National Center for Employee Ownership)
Senators' Bill Would End Tax Break on Stock Options
"[The bill] would end the ability for corporations to deduct expenses for stock options from their taxes at greater amounts than the expenses in their financial statements. The measure would reduce the federal budget deficit by $24.6 billion over 10 years, according to the Joint Committee on Taxation." (Employee Benefit News; free registration required)
Employee Ownership Update for July 15, 2011
NCEO Executive Director Loren Rodgers discusses the following: A new study shows equity plans are a large part of employee savings. Other research sheds light on the relation between ESOPs and disclosure practices at public companies. ESOP-owned Reflexite will merge with a German company. The ESOP is a core part of the corporate identity of USA800, a call center company. The Economist published an obituary for Robert Oakeshott. (National Center for Employee Ownership (NCEO))
Stock Options: A Critical Element of CEO Compensation
"[A] recent study confirms that options have an effect on risk taking -- both dampening it and increasing it, depending on stock price. It's an issue that 'should be factored into compensation structure by boards of directors.'" (Human Resource Executive Online)
Employee Ownership Update for July 1, 2011
NCEO Executive Director Loren Rodgers discusses employee ownership companies among the Winning Workplace Award winners; the Supreme Court's CIGNA v. Amara decision; proposed regulations on the taxation of performance-based equity compensation; employee ownership and values; and the death of Robert Oakeshott. (The National Center for Employee Ownership (NCEO))
If I'd Only Known That: A new book on what can go wrong with your equity compensation plan
If I'd Only Known That is a new book that illustrates a multitude of common mistakes in equity compensation, how to avoid them, and what to do about them when they occur. (National Center for Employee Ownership)
[Guidance Overview] IRS's Proposed New Regulations on Sec. 162(m) Performance-Based Compensation Exception
"[T]he proposed regulation would clarify that the transitional relief provided under ?1.162-27(f)(1) applies to any compensation received pursuant the exercise of a stock option, SAR, or restricted stock award granted under a properly disclosed plan during the transition period." (Michael S. Melbinger via Winston & Strawn LLP)
[Guidance Overview] Texas Supreme Court Holds Stock Options Award to Valuable Employee Provides Necessary 'Nexus' to Protection of Company's Goodwill
"[T]he court ruled by a 6-3 majority that stock options granted to a valuable employee are sufficient consideration to support a post-employment restrictive covenant because they are 'reasonably related' to the company's interest in protecting its goodwill." (Littler Mendelson P.C.)
[Official Guidance] Text of IRS Notice of Proposed Rulemaking: Certain Employee Remuneration in Excess of $1,000,000 Under IRC Section 162(m) (PDF)
"The proposed regulations clarify that qualified performance-basedcompensation attributable to stock options and stock appreciation rightsmust specify the maximum number of shares with respect to which options or rights may be granted to each individual employee." (American Benefits Council)
[Guidance Overview] Stock Options Offer Valid in Marsh Noncompete Dispute Says Court
"According to the decision in Marsh USA Inc. and Marsh & McLennan Cos. Inc. vs. Rex Cook, in 2005 Mr. Cook . . . signed an agreement under which he would exercise stock options in exchange for signing a nonsolicitation agreement." (Business Insurance)
Employee Ownership Update for June 15, 2011
NCEO Executive Director Loren Rodgers discusses a $10 million settlement in a DOL suit against an ESOP company, payroll tax relief for stock options in San Francisco, a Senate bill to block the DOL's proposal to make ESOP appraisers plan fiduciaries, and more. (National Center for Employee Ownership)
The Treatment of Stock Options in the Context of a Merger or Acquisition Transaction
"A principal issue in merger and acquisition transactions is whether, and to what extent, outstanding options will survive the completion of the transaction and whether and when the vesting of options will be accelerated." (Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.)
[Guidance Overview] Modifying Options After Exercise: Good Faith Required
"A privately held company recently learned that the company's broadauthority under its LTIP to modify or even cancel outstanding stock options had its limits. The result was that the company's former CFO received $5.4 million more upon exercising options than the company argued was owed." (National Association of Stock Plan Professionals via Utz, Miller & Eickman, LLC)
Employee Ownership Update for June 1, 2011
In his latest column, NCEO Executive Director Loren Rodgers discusses a Treasury official's doubts about ESOP floor price protection, research on the behavioral impact of stock options, and more. (National Center for Employee Ownership)
Stock Options Issued As Incentive to Motivate Employees to Focus on Making the Company More Successful and More Profitable
"But new Wharton research shows that managers may not view stock options as an incentive at all. [A] paper entitled, 'Stock Option Exercise and Gift Exchange Relationships: Evidence for a Large U.S. Company,' . . . found the practice impacted employee performance after workers earned a sizable payoff from exercising their stock options." (Knowledge@Wharton via Human Resource Executive Online)
New Developments in Equity Compensation Reporting: Cost Basis, Section 6039, and Proxy Reporting
The NCEO has just released an issue brief on new developments in equity compensation reporting. It will go out to everyone with an NCEO issue brief subscription, and otherwise can be ordered in print or PDF form. (National Center for Employee Ownership)
Equity Compensation Update Course Now Available
The NCEO's latest Equity Compensation Update course is now available. It provides articles and quizzes on recent developments in the field (from January 2010 through March 2011) in corporate and securities law; taxation; accounting; and equity plan design, administration, and analysis. The course provides 15 hours of continuing education credit for Certified Equity Professional (CEP) designees. (National Center for Employee Ownership (NCEO))
[Guidance Overview] Finistar Options Backdating Suit Reinstated
"The court said because plaintiffs point to specific grants, specific language in option plans, specific public disclosures, and specific empirical analysis to show knowing and purposeful violations, then they provided sufficient particularity in the pleading to survive a motion to dismiss for failure to make demand." (PLANSPONSOR.COM)
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