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Executive benefits


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Executive Compensation as Corporate Waste? Delaware Court Allows a Lawsuit to Continue
"Two full pages of the opinion are devoted to listing facts and information 'demonstrating that it should have been abundantly clear to the members of the Board ... that far from being 'actively engaged' in CBS's affairs, Redstone was providing no meaningful services to the Company beginning at some point in the latter part of 2014 or in 2015. During and after that period, CBS paid Mr. Redstone more than $13 million, most of it in performance bonuses." [Feuer v. Redstone, No. 12575-CB (Del. Ch. Apr. 19, 2018)] (Winston & Strawn LLP)
Just Because Your Company Is Privately Held Doesn't Mean the SEC Isn't Watching
"Private companies should [1] develop written policies and procedures dealing with equity-based compensation to ensure their compliance with Rule 701 limits.... [2] develop written policies and procedures that address how financial disclosures are to be disseminated so as to safeguard the confidentiality of the financial information while still complying with Rule 701.... [3] put into place processes and procedures that ensure as appropriate that timely reporting and disclosures are provided to employees before the Rule 701 $5M threshold is triggered in any 12-month period." (Holifield Janich Rachal & Ferrera, PLLC)
New Target of 'Shareholder' Strike Suit Litigation
"Now that the Tax Cuts and Jobs Act of 2017 has eliminated the performance-based compensation exception to Code Section 162(m), a plaintiffs law firm has announced that it was shocked, shocked by the fact that a company was using a 162(m) umbrella plan to qualify its compensation as performance-based." (Winston & Strawn LLP)
Advantages to Pre-Tax Deferral of Income in an Uncertain Tax Environment: 2018 Updates (PDF)
14 pages. "This article explains how you should consider recent and future tax rate changes when analyzing whether to participate in your company's nonqualified deferred compensation (NQDC) plan.... The only scenarios favoring the personal investment account involve high wage earners willing to settle for a meager 3% pre-tax return and invest their income over a short 10-year period. In all other scenarios, an NQDC account provided an advantage (in terms of the total amount accumulated after taxes are paid) ranging from a low of 1.75% to 47.75%." (Fulcrum Partners LLC)
Embracing the Quasi-Clawback
"In light of the difficulty of recouping compensation, companies should consider what ... the quasi-clawback, or the forfeiture of amounts that have not yet been earned, or have been earned but not yet paid....[W]ays in which companies can implement quasi-clawback features in their compensation programs: [1] Forfeiture of unvested incentive based compensation ... [2] Deferred payment of earned incentive-based compensation.... [3] Forfeiture of nonqualified deferred compensation." (Shearman & Sterling LLP)
Stock Awards Behind Most CEO Pay Hikes
"More CEOs at large money managers or banks with large asset management units received total compensation increases in 2017 compared with the previous year, and most increases came via stock awards -- a practice that sources said would continue as managers tie chief executive pay to long-term performance." (Pensions & Investments)
California (Re)Introduces Pay Ratio Corporate Tax Bill with Unique Calculation
"California Senate Bill 1398, introduced by Democrat State Senator Nancy Skinner, would increase corporate taxes for public companies from the base rate of 8.84 percent to a high of 13 percent for companies with pay ratios exceeding 300. Significantly, the tax rate would increase by an additional 50 percent if a company reduces its U.S. full-time workforce by 10 percent or more during the [previous tax] year." (HR Policy Association)
IRS Filing Deadlines and Stock Compensation Planning for 2018
"In any tax season, the recognition of income from stock compensation or an employee stock purchase plan can complicate your return. Examples include income from an NQSO exercise, an ISO or ESPP disqualifying disposition, or the vesting of restricted stock.... [T]his tax season has the potential to be more confusing than most if you sold any stock last year. Issues are especially likely to arise with the cost basis as reported on Form 1099-B and with the tax-return reporting on Form 8949 and Schedule D." (myStockOptions.com)
[Guidance Overview] Tax-Exempt Executive Compensation Under Fire
"To which tax-exempt entities do the new taxes apply? ... Who is a covered employee? ... What is an 'Excess Parachute Payment' for purposes of the Parachute Tax? ... What is 'Remuneration' for purposes of the Excess Compensation Tax? ... Do the Excess Compensation Tax and the Parachute Tax apply to individuals providing services through another entity, a partnership, or in a capacity other than that of an employee? ... What should tax-exempt entities be doing at this time, and what, if any, planning opportunities are there to address these new taxes?" (Michael Best)
Credit Karma Settles with SEC over Alleged Stock Option Disclosure Failures
"The [SEC] recently instituted a cease-and-desist proceeding against Credit Karma, Inc.... for failing to provide adequate disclosure to its stock option holders pursuant to SEC Rule 701 because Credit Karma did not comply with relevant disclosure requirements for offerings in excess of $5 million.... Credit Karma agreed to a settlement with the SEC and paid a civil penalty of $160,000 -- well above what the disclosures would have cost.... Rule 701 is a safe harbor exemption that excuses certain employee benefit plans, including stock incentive plans, from registering equity offerings and sales under the Securities Act." (DLA Piper)
[Opinion] Navigating the Pay-Ratio Quagmire
"While pay-ratio information is supposed to be useful to investors, attention needs to be paid to the anticipated reactions to these disclosures by the media, current and potential employees and unions. Anyone who is a shareholder will have access to this information, including employees, who may own stock either directly or through a 401(k) plan. Religious and other groups who own just a single share will also have access to it. And for larger companies, it would be surprising if the media did not focus on 'outliers.' " (Human Resource Executive)
Should Compensation Committees Seek CEO Input When Deciding CEO Pay?
"[T]he CEO's perspective can be useful ... The CEO should not be present when the compensation committee is making decisions about his or her compensation.... Prior to receiving any input from the CEO, the compensation committee chair, board chair, or lead independent director should set clear expectations about the process and that the committee or board will make the final pay decisions.... Directors should get the CEO's view of his or her individual and company performance." (Meridian Compensation Partners, LLC)
Managing an NQDC Plan Investment Menu
"Unlike a qualified defined contribution plan, in which plan assets are segregated from the employer's general assets in a trust or custodial account, the compensation deferred into an NQDC plan remains commingled with the employer's general assets and the returns are notional. This arrangement is significant because the plan sponsor bears the responsibility for funding the notional returns generated by the investment menu." (Callan)
Employee Stock Purchase Plans: The Biggest Tax-Return Mistakes to Avoid
"[1] Not filing Form 8949 after an immediate sale of ESPP shares at purchase.... [2] Paying tax on the discount too early.... [3] Directly using what appears as the cost basis on your Form 1099-B.... [4] Paying the wrong tax on the discount.... [5] Using the wrong price when there is no lookback." (myStockOptions.com)
[Guidance Overview] Expanded Disability Claims Procedure Rules Become Effective in Three Days
"Plan sponsors need to review their plans to determine whether such plans provide disability benefits and, if so, whether the rule applies. This review should encompass not only short- and long-term disability plans, but also ERISA-governed retirement, severance and 'top hat' plans that provide disability benefits.... [A]ppropriate steps should be taken to amend plan documents, prepare necessary participant communications and confirm proper administration of any disability claims filed on or after April 1." (McGuireWoods)
Big Question Under CEO Pay Ratio Rule: Who Is Your Median Employee?
"Who is the worker at the midpoint of the employee population in terms of compensation? Rules and guidance from the [SEC] allow some flexibility with this determination. As a result, companies aren't just answering one big question when identifying that special median somebody, but instead addressing a number of smaller questions along the way." (Bloomberg BNA)
Common U.S. Securities Problems with Canadian Stock-Based Compensation Plans
"For companies that are cross-listed and file reports with the [SEC], the intention is typically to register the underlying securities by filing a Form S-8 with the SEC. For companies that do not file SEC reports -- whether publicly traded in Canada or privately held -- the intention is typically to rely on the exemption provided by Rule 701 under the Securities Act of 1933 and exemptions under the securities laws of the states in which awards will be granted." (Dorsey)
Five Primary Components of an Effective Long Term Incentive Plan
"[1] Determine business drivers that trigger awards.... [2] Determine what level of executive should be eligible to participate.... [3] Determine share rates.... [4] Allocation of award among eligible group.... [5] Award distribution." (Fulcrum Partners LLC)
Comparing CEO Pay Ratios: What the First 200 Filings Show
"[Put] disclosures in context so that differences are framed by labor demographics, company size, CEO compensation and calculation methodology. This may be less important for companies with ratios that are comparable with their peers, but when a significant disparity exists, it is time to focus on the reasons why ... Median pay differences will fluctuate based on company labor models ... Variations in CEO compensation due to special circumstances and transitions ... Flexibility in methodology predictably yielded a wide variety of approaches." (Willis Towers Watson)
Companies Show No Love for Hard-Won Exemption to Pay Ratio Rule
"Business advocates pressed the SEC as it drafted the rule to include a way for companies to avert potential privacy violations when collecting information on non-U.S. workers.... But the extra legwork and added disclosure required has turned off most companies to its use." (Bloomberg BNA)
[Opinion] Does Tax Deductibility Affect CEO Pay? the Case of the Health Insurance Industry
"The failure of reduced deductibility to slow growth in CEO pay in the health insurance sector ... means that the TCJA provisions are unlikely to significantly affect CEO pay more widely.... To restrain growth in CEO pay we need reforms to improve corporate governance and give shareholders more power over corporate executives." (Economic Policy Institute)
Restricted Stock/RSUs and Tax Returns: Eight Costly Mistakes to Avoid
"[1] After selling any or all of the shares at vesting, you still need to report this sale on Form 8949 and Schedule D even though you are also including it as part of your compensation income.... [2] [Y]our tax basis for reporting the stock sale in column (e) on Form 8949 is the amount of compensation income at vesting that appeared on your W-2 ... [3] You will also mistakenly double-report income if you do not realize that your W-2 income in Box 1 already includes stock compensation income." (myStockOptions.com)
Don't Amend Executive Comp Plans Yet for New Disability Claims Rules
"It is likely that all or a portion of the benefits earned or accrued before 2018 under non-qualified deferred compensation, executive retirement, and severance plans will be exempt from the $1 million deductibility limits of Code Section 162(m) under the grandfathering provisions of the transition rule.... Do not amend your non-qualified deferred compensation, executive retirement, and severance plans now in order to preserve the exemption." (Winston & Strawn LLP)
Emerging Trends in Pay Ratio Disclosure
"Few companies use statistical sampling to identify their median employees and ... companies rely on the de minimis exemption, but not the data privacy exemption. Companies also exclude employees acquired in acquisitions. Very few companies use supplemental pay ratios, even if they have pay ratios that are on the higher end of the range." (Pillsbury Winthrop Shaw Pittman LLP)
Using Executive Benefit Plans to Attract Reward and Retain Top Talent (PDF)
"Since nonqualified plans are not subject to the same regulatory requirements that apply to qualified plans, employers can provide benefits through nonqualified plans to recruit and retain key employees who cannot be fully compensated through a combination of salary and qualified plans due to the cost and compliance burdens that arise when similar benefits are provided to all employees." (Pentegra, via Plan Consultant)
2018 Proxy Season: Early Trends in Pay Ratio Disclosure (PDF)
"The median pay ratio disclosed by these companies is 87x. The lowest ratio is 1x (Apollo Global Management, Dorchester Minerals and The Carlyle Group) and the highest ratio is 1465x (Fresh Del Monte Produce Inc.).... As expected, the pay ratio correlates with company size, with larger companies disclosing higher ratios." (Compensation Advisory Partners [CAP])
Pay Ratio Disclosures Mislead Investors
"An early tabulation of companies' first reported CEO pay ratios confirms what many observers had been expecting: taken as a whole, the disclosures are rife with misleading information.... The rule is intended to provide investors with more information with which to evaluate CEO compensation. However, in many cases the disclosures do no such thing. Most damning are examples of companies reporting dubiously low ratios." (CFO)
The ABCs of NQDCs: They're Not DC Plans, Despite the Similarities (PDF)
"[B]ecause NQDC plans are not formally funded, the returns generated by participants' investment elections become an aggregate liability for the plan sponsor on the company's balance sheet. As a result, the selection of the investment menu is one of the key drivers of complexity in managing liabilities." (Callan; free registration may be required)
[Guidance Overview] Rethinking Executive Compensation While Awaiting Section 162(m) Guidance (PDF)
"[T]he lost deductions may become a cost of doing business and a trade-off for the tax benefits corporations receive from the reduction in the corporate tax rate from 35% to 21% ... [P]otentially applicable techniques to preserve the compensation deductions or maximize other benefits [include] [1] Use nonqualified deferred compensation annuities.... [2] Maintain grandfathered plans.... [3] Set more challenging performance goals.... [4] Spread vesting.... [5] Award incentive stock options (ISOs)." (Fulcrum Partners LLC)
[Guidance Overview] State Tax Implications of Federal Tax Changes to Section 162(m)
"[R]olling conformity states will automatically incorporate the income tax base changes resulting from the changes to Section 162(m) unless they choose to affirmatively decouple from these provisions in the Act.... [S]tatic conformity states with fixed dates before the passage of the Act would not adopt the changes to Section 162(m) unless they amend their laws to conform to the Act.... [T]axpayers in these states will still have to separately track their starting point for state corporate income purposes, using the IRC in effect as of its fixed date (i.e., before the passage of the Act)." (Morgan Lewis)
Update on Top Hat Plan Litigation
"One of the interesting points of the Court's decision was its discussion of the DOL's only guidance on this requirement, Opinion Letter 90-14A, and the question of whether an employee must have 'bargaining power' in order to qualify as a member of 'a select group of management or highly compensated employees.' " [Sikora v. UPMC, No. 17-1288 (3d Cir. Nov. 24, 2017)] (Winston & Strawn LLP)
CEO Pay Ratio Checklist (PDF)
"Consider identifying a date that best reflects the demographics of the company.... Confirm with local counsel if there are any data privacy laws in that country that would prohibit collection of information.... The de minimis exemption may be useful where it impacts the median.... Annualizing the compensation of full-time and permanent full time and part-time employees is probably not worth the time and effort.... Using estimates or statistical sampling may be overly burdensome for many companies and not actually save any time.... In drafting the disclosure, consider impact on investor and employee relations." (Orrick)
[Guidance Overview] Implications of Tax Cuts and Jobs Act for Public Company Executive Compensation Programs
"Before making any changes to existing covered employee compensation arrangements, consider whether such changes are material modifications that will make the transition relief unavailable. Revise the standard tax discussion that appears in proxy statements and other securities filings to reference the changes to Section 162(m) and the impact of such changes on existing executive compensation programs and future compensation decisions. In new compensation plans, consider omitting language that was previously intended to comply with the old 'performance-based compensation' exception." (Snell & Wilmer)
Walt Disney Shareholders Reject Executive Compensation in Non-Binding Vote
"Fifty-two percent of shareholders rejected the compensation package of CEO Robert A. Iger and four other executives, including [CalPERS] ... [CalSTRS] ... Texas Teacher Retirement System ... [and] Florida State Board of Administration ... Disney said ... after the meeting that it would take the non-binding vote 'under advisement for future CEO compensation.' " (Pensions & Investments)
Private and Public Company Executive Compensation Practices: Where They Merge and Diverge
"Private companies are significantly less likely to provide a regular long-term incentive program (LTIP).... LTIP programs of private companies are very different from public company practices: [1] LTIP grant values are about 30% lower (varies by position and level); [2] 80% of LTIPs are performance cash plans; [3] Much less likely to use real stock or options; [4] Much less likely to use value-based performance measures. Major similarities, however, also exist: [1] LTIP grants made annually; [2] New performance cycles start annually; [3] Vesting over three to four years." (Willis Towers Watson)
[Guidance Overview] Reporting and Withholding on Nonqualified Deferred Compensation (PDF)
20 pages. "This article discusses the reporting and withholding requirements for NQDC plans ... Reporting requirements include understanding which form to use and how to complete the form. Withholding requirements include the amount and timing of withholding for FICA taxes, federal income taxes, and state income taxes." (Aon Hewitt, via Journal of Deferred Compensation)
[Guidance Overview] Premium Interest Tax for 409A Failures (PDF)
17 pages. "IRC Section 409A and Proposed Treasury Regulations established premium interest tax as an additional income tax on Section 409A failures. The purpose of the tax is to retroactively disqualify deferrals from having received tax-deferred status without causing an extreme administrative burden on plan sponsors or participants.... This article will describe a comprehensive list of steps used to calculate premium interest tax as well as explore common issues with each step." (Aon Hewitt, via Journal of Deferred Compensation)
Section 162(m) Changes Require Some Planning
"What new processes will be required to determine and track covered employees? ... What changes in compensation practices can be made? ... Should the design of compensation plans be modified? ... ? Are you now a 'public company' subject to 162(m)? ... Don't let the 'tax tail wag the dog.' " (Wilkins Finston Friedman Law Group LLP)
[Guidance Overview] IRS Guidance Regarding Section 409A and Pre-2009 Section 457A Deferrals
"Although a nonqualified entity had the opportunity to amend its nonqualified deferred compensation [NQDC] plan pursuant to the transitional relief granted under the 2009 Notice, the applicability of section 457A to an entity could have changed after December 31, 2011.... [Notice 2017-75] and forthcoming regulations offer flexibility to [NQDCs] and taxpayers who may otherwise be adversely affected by the inclusion of Pre-2009 Deferrals in gross income without the corresponding liquidity to pay Federal, state, local, and foreign income taxes owed." (Plan Sponsor Council of America [PSCA])
[Guidance Overview] Impact of Tax Reform on Executive Compensation and Employee Benefits (PDF)
16 presentation slides. Topics include: [1] Key changes under Tax Cuts and Jobs Act; [2] Transition rule under Tax Cuts and Jobs Act; [3] Original transition rule and interpretation; [4] 'Negative discretion' under bonus plans; [5] Material modification; [6] Nonqualified Deferred Compensation (NQDC); and [7] Potential changes to incentive compensation practices. (McDermott Will & Emery)
One-Year Minimum Vesting for Equity Awards and the 'Directors Compensation Year'
"ISS is 'requiring' that equity incentive plans provide a one-year minimum vesting period for all awards. The plan's language must preclude the possibility of awards vesting prior to one-year from the grant date.... ISS allows that the approximately 12-month period between regular annual shareholders meetings will satisfy its requirement, even if slightly less than 365 days." (Winston & Strawn LLP)
[Guidance Overview] Tax Reform and Qualified Equity Grants: New Tax Provisions
"[T]he ability to make deferral elections under the new Section 83(i) could be useful in specific situations, such as a private company with a rapidly appreciating stock price and expectations of a liquidity event, but the administrative complexity and broad based grant requirements will limit the usefulness of this election for a majority of companies." (Holland & Hart LLP)
CEO Pay Ratios in Context (PDF)
"The CEO Pay Ratios contained in this Client Briefing were calculated using the BLS median annual compensation for a U.S. worker of $43,992 for 2016. As a result, the ratios may not reflect the ratios that will be disclosed in 2018 proxy statements for [1] companies with median employee annual total compensation significantly above or below the BLS amount, and [2] companies with a large global employee workforce such that their median employee is not based in the U.S." (ExeQuity)
CEO Pay Ratios Highest at Large Multinationals
"Mega-cap companies have an average CEO pay ratio of 243:1, while small-cap companies (based on Equilar's definition of $700 million to $3 billion) have a much lower pay ratio of 72:1, according to the survey of 356 companies. Similarly, companies with the largest employee base have the highest CEO-median worker pay ratios: firms employing more than 43,000 employees have a median ratio of 318:1 and those employing fewer than 2,300 employees have a ratio of 45:1." (Corporate Secretary)
[Guidance Overview] Tax-Exempt Organizations Face New Tax Penalty on Excess Compensation: Due Diligence and Minimization
"There are a number of ways that affected organizations can minimize the new tax penalty. For example: [1] Maximize benefits under tax-qualified retirement plans.... [2] Consider alternative methods of deferring compensation, such as a Code section 457(f) plan or a split-dollar life arrangement.... [3] [T]he proposed Code section 457(f) regulations ... now provide several methods that can be used to spread these payments out over time, which could enable the organization to avoid accruing post-termination payments in excess of $1,000,000." (Trucker Huss)
U.S. Biopharma Companies Segment Long-Term Incentives by Function, with Focus on R&D
"LTI eligibility is high or even universal in all functional areas for roles with base salaries of $120,000 and above.... In the commercial, industrial affairs and support functions, LTI eligibility drops off materially below this level of base salary. In contrast, LTI eligibility tails off much more slowly in the R&D function ... [M]any biopharma companies are using LTI in a targeted fashion to boost their ability to attract, retain and engage R&D talent from a relatively early career stage." (Willis Towers Watson)
[Guidance Overview] Insights Into Tax Reform's Radical New Game Plan for Tax Exempt Organizations (PDF)
"[O]rganizations operated without an expectation of retaining profits may now find themselves subject to either complying with the new compensation limit or paying the tax. While the changes to the compensation limit for companies with publicly traded securities included a transition rule, ... the addition of this compensation limit to [non-profit] entities -- that had not faced this type of hard line limit -- did not provide for any transition for existing contracts." (Winstead PC, via Bloomberg Tax Daily Tax Report)
Corrections and Substantive Fixes Needed with Respect to Employee Benefit Changes Made by the 2017 Tax Act
"[T]he 2017 Act limits the personal casualty loss itemized deduction for property losses (not used in connection with a trade or business or transaction entered into for profit) to apply only to losses incurred as a result of federally-declared disasters.... Another possible error in drafting involves distributions from retirement plans that are used to pay for expenses for qualified higher education.... As the rules are currently written, it is unclear whether public universities are included in the definition [of an applicable tax-exempt organization], and therefore subject to the excise tax on excess executive compensation under Section 4960." (Bloomberg BNA)
How Compensation Committees Should Treat the CEO Pay Ratio Disclosure
"Typically, compensation committees perform certain activities such as reviewing CEO performance and setting CEO pay which is mandated by their charters with minimum requirements dictated by their listing exchange.... SEC counsel generally likes to keep these charters focused, although [the authors] have seen some with more detail about additional responsibilities, and some that expand the committee's role based on a company's unique circumstances." (Willis Towers Watson)
[Guidance Overview] Are Your Executive Compensation Arrangements Safe from the New Disability Regs?
"[W]hether the Final Rule applies to an executive compensation arrangement is dependent on [1] whether the particular executive compensation is subject to ERISA and thereby ERISA's claims procedure requirements, [2] whether there is a disability payment trigger under the executive compensation arrangement and [3] how the disability determination is made under the executive compensation arrangement." (McDermott Will & Emery)
The Next Generation of Compensation Clawback Policies
"BlackRock's clawback voting policy [has] changed substantially, and [is reprinted in this article].... [C]ompanies are considering (and investors are demanding) the next generation in clawback policies in light of some of the corporate 'scandals' during this period." (Winston & Strawn LLP)
[Guidance Overview] Clarifying the Use of Nonqualified Plans to Mitigate Lost Deduction Under the New 162(m) Regime
"After a covered employee's retirement or other termination of employment, the company still will be able to pay and deduct up to $1 million in benefits each year, even under the 'once a covered employee always a covered employee' rule.... If an employee defers compensation ... the company will be replacing current, non-deductible cash payments with a promise to pay cash in the future. If the future payouts amount to less than $1 million per year, the payouts will then be fully deductible[.]" (Winston & Strawn LLP)
[Guidance Overview] Don't Overlook Death and Disability Benefits in Reporting Potential Payments Upon Termination of Employment or Change in Control
"Many companies' equity incentive plans or award agreements provide for full or partially accelerated vesting upon an executive's termination of employment due to death or disability.... Compliance and Disclosure Interpretation (C&DI) Question 126.02 states that the Instruction 5 standard that the 'scope' of arrangements not discriminate in favor of executive officers would not be satisfied where the awards to executives are in amounts greater than those provided to all salaried employees -- which is nearly always the case." (Winston & Strawn LLP)
[Guidance Overview] Impact of the Tax Cuts and Jobs Act on Section 162(m)
"The Act's conference agreement ... makes clear that a contract that was in place prior to November 2, 2017, and that is renewed after that date, will be treated as a new contract that will no longer qualify for the transition rule. The requirement of a written binding contract under the transition rule raises issues such as whether a contract or plan subject to the compensation committee's discretion to adjust a performance award downward will result in the contract being ineligible for the transition rule." (Benefits Bryan Cave)
Overarching and Operating Principles of Executive Compensation (PDF)
"[F]our overarching principles form the foundation of an effective [executive compensation] program: ... [1] 'Purpose' captures why an organization exists, what its mission is with its various constituents, and its strategy and objectives.... [2] 'Alignment' captures the essence of agency theory ... by ensuring that management is aligned with and acting in the best interests of shareholders, and possibly in those of other stakeholders.... [3] 'Accountability' captures the relationship among pay, organization performance, and individual actions.... [4] 'Engagement' captures human motivation and the psychological implications of disciplines like behavioral economics and self-determination theory." (Willis Towers Watson)
The Purpose and Importance of Executive Compensation (PDF)
"[H]igh-performing corporations are increasingly important to global society -- beyond economic growth -- and a strategic, principles-based approach to executive compensation helps to drive optimal business performance. That means creating an effective executive compensation system ultimately generates value for senior managers, their companies (including other employees), the economy, and society." (Willis Towers Watson)
How Executive Compensation Changes Affect Employers
"As companies deal with this change, there are several issues they should consider. [1] Is grandfather relief available? ... [2] What's the administrative burden? ... [3] Could performance goals change?" (Bloomberg BNA)
Delaware Court Case May Have Far Reaching Effects on Director Compensation
"According to the Court's decision, the presence or absence of [prescribed annual] limits will determine whether director compensation is reviewed by Delaware courts under the business-friendly 'business judgment rule' or the more stringent 'entire fairness' standard if the compensation is challenged in a shareholder suit. Beyond the applicable legal standard of review, the Court's decision may increase the prevalence of 'strike' suits against public companies challenging director compensation." [In re Investors Bancorp, Inc. Stockholder Litigation, No. 169, 2017 (Del. Dec. 19, 2017)] (Meridian Compensation Partners, LLC)
[Guidance Overview] New Tax Law Strengthens Limits on Excessive Compensation
"Companies should be careful in determining which arrangements are grandfathered. It is not enough that a compensation arrangement was set forth in a valid writing on November 2, 2017; it must meet other requirements to qualify for grandfathering. While the exact scope of this grandfathering rule will need to be clarified by the IRS, it appears to mean payments that would have been tax deductible under the old rule as performance-based compensation or commissions will continue to be deductible if they are made pursuant to a contract that satisfies the grandfathering rule." (Poyner Spruill LLP)
Don't Disband That Compensation Committee of Outside Directors Just Yet
"[A] compensation committee qualifying under 162(m) still must certify the achievement of performance goals for performance periods ending in 2017. Most equity awards made before November 2017 should qualify for grandfathering under the 162(m) transition rule. Until IRS guidance clarifies the extent of the grandfathering protection, we don't want to do anything that might adversely affect that." (Winston & Strawn LLP)

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