The NASPP Blog

August 18, 2009

Section 6039 and the Recession

I got nothin’. No new legislation, no IRS pronouncements, no SEC proposals…the world of stock compensation was eerily quiet last week. So I have a hodge podge of non-news this week.

Section 6039 Returns
I have been pestering folks that I know at the IRS and Treasury for a status update on the Section 6039 and Section 423 regulations. I don’t have any news on when either of these regs will be issued, but I have heard that it is likely that the effective date for filing the Section 6039 returns will be delayed. No word on how long the delay will be or when we’ll know for sure, but I suspect that the delay means that the final regulations are going to differ from the regulations that were proposed last year. Of course, the delayed effective date would only apply to the returns filed with the IRS; companies will continue to be required to provide the information statements to employees, just as they are now.

Did Stock Options Cause the Recession?
This headline showed up in my Google alert on stock options last week. Apparently, a research paper titled “Some Unpleasant General Equilibrium Implications of Executive Incentive Compensation Contracts” has been published positing that this is case. The general idea is that stock options encouraged executives to take more risks than they would have otherwise, ultimately leading to the demise of their firms, which, in turn, led to the recession. This isn’t really a new idea–it’s the reason the SEC has proposed to require companies to discuss the impact of their compensation programs on risk-taking behavior in the CD&A and Treasury requires similar analysis from TARP companies.

I had hoped to read the paper and provide a summary of it for you. But I didn’t make it very far. The paper includes sentences like: “Sunspot equilibria have previously been studied in one-sector dynamic equilibrium models with external effects or monopolistic competition coupled with some degree of increasing returns.” And that’s just in the third paragraph of the introduction; the rest of the paper is much worse. Ten points to anyone who can decipher that sentence. Ten more points for anyone who can use the words “sunspots” and “stock options” in the same sentence.

If anyone wants to read the paper and provide a summary of it, I’d be happy to let you guest author the blog for a day.

Quick Survey on Equity Award Modifications
Take the NASPP’s Quick Survey on Equity Award Modifications to find out what types of modifications are most common and practices related to modifications. The survey is just seven short questions–you can complete it in just a few minutes. And don’t forget to email your questions on award modifications for our August 27 webcast, “Ask the Experts: Modifications of Equity Awards.”

NASPP Conference Workshop of the Week
This week’s workshop is “IFRS–A Lesson in Implementation.” The migration to IFRS will involve many challenges–and stock compensation is an area that imposes some of the greatest burdens. More than just a technical transition, IFRS will require companies to re-engineer their data flows, linking diverse organizational aspects such as stock plan administration, payroll, finance, tax and human resources. This panel–which includes a company that has already fully transitioned to IFRS–will provide practical hands-on guidance on overcoming the obstacles and smoothly transitioning to this complex new accounting standard.

NASPP “To Do” List
We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing “to do” list for you here in my blog. 

– Barbara