Here’s what’s happening at your local NASPP chapter this week:
Ohio: Jennifer Tardif of Solium presents “How to Minimize Risk while Maximizing the Effectiveness of Equity Compensation Management.” (Wednesday, April 16, 11:30 AM)
San Francisco: Usman Zafar and Denise Scoville-Glackin of EASi present “Treatment of Equity Awards Upon Termination.” (Wednesday, April 16, noon)
Silicon Valley: Scott Barrall of Deloitte Tax, Suzie Bentley of Nvidia, and Julie Rumberger of HP present “Taking the ‘Ouch’ Out–Tax Balm for Stock Compensation.” (Wednesday, April 16, 11:30 AM)
Chicago: Andre Rooks of Mercer presents “Executive Succession Planning.” (Thursday, April 17, 7:30 AM)
Dallas: Nathan O’Connor and Raenelle James of Equity Methods present “2014 State of the Union : Equity Compensation Design, Valuation & Accounting.” (Thursday, April 17, 11:00 AM)
San Fernando Valley: Justin LaSalle and Mark Miller of Deloitte Tax present “To Mobility and Beyond! Taking the Mobile Employee Discussion a Step Further, for an Educated Audience.” (Thursday, April 17, 11:30 AM)
The NASPP Career Center, barely 18 months old, hit a new record this week with 39 active career opportunities. Is it a booming economy or something else? In today’s blog I’ll give you the lay of the land on opportunities, as well as a few insights on why so many jobs are up for grabs.
What’s the Career Center?
The NASPP launched our Career Center in the fall of 2012 to replace our job bank and offer NASPP members more robust Career resources, and it’s been growing steadily since that time. We’ve had over 300 industry job opportunities posted since inception! In 2013 we added both a blog (guest authored by Andrea Best, Ph.D of Stock & Option Solutions) and a podcast series.
Loads of Opportunities
From time to time I hear people say: “Yeah, I heard of that Career Center, but I’m guessing you only have a bunch of Silicon Valley jobs posted in there.” If that’s your thought, too, then you are going to be surprised at what I have to say next. The opportunities in the Career Center span 14 states in all regions of the continental U.S. Just in case you’re still a skeptic, I’ll list them here: CA, CT, GA, MA, MI, MN, NC, NJ, NY, OK, PA, TX, UT and WA. Yep, I checked my geography, and that covers, the west, midwest, east and southern regions of the U.S.
Job Seekers
If you’re looking for a job, we’ve got openings posted by both issuers and service providers. Willing to relocate? You’ve got a lot of choices. NASPP members can browse job openings, contact prospective employers and post their resume profile as well.
Job Recruiters
Have an opening? Be sure to post it in the Career Center. It’s free, and you don’t have to be an NASPP member to post a job.
Why the Job Boom?
I wondered the same thing. Is it an economic boom? Signs of lots of turnover? Or something else? It’s hard to know for sure, but the past two months of job reports turned out a steady rate of new jobs – nothing that suggests that unemployment rates will drop in the near future, but signs that seem to suggest the more employers will add jobs this spring. I personally observed in the Career Center that there were a number of companies with multiple job openings – perhaps a good sign?
Stock Plan Administration Survey The NASPP’s 2014 Domestic Stock Plan Design Survey (co-sponsored by Deloitte Consulting LLP) is now open for participation. If you are an issuer, you have to complete the survey by April 25 to access the full results. You’ll be sorry if you miss this chance: register to participate today.
NASPP To Do List Here is your NASPP to do list for this week:
Sign up for the NASPP’s acclaimed online Stock Plan Fundamentals course; the first webcast is April 16.
Register for the 22nd Annual NASPP Conference. The Conference will be held from September 29-October 2, 2014 at the Mandalay Bay in Las Vegas. Don’t wait–the price goes up again after May 9!
The NASPP’s 2014 Domestic Stock Plan Administration Survey (co-sponsored by Deloitte Consulting LLP) is now open for participation. This is the industry’s most comprehensive survey on stock plan administration, easily worth the cost of NASPP membership. Seriously–consulting firms charge upwards of $1,000 to participate in surveys that offer less data with fewer respondents. We let you participate for free–but issuers have to participate to receive the full survey results. Don’t put it off; you’re going to want this data and you only have until April 25 to complete the survey.
For today’s blog, I highlight just a few of the many data points in the survey that I am eagerly anticipating an update on. These are hot topics today and I’m looking forward to finding out where current practices stand with respect to them:
The Latest Trends in ESPPs: Rumor has it that companies have been implementing new ESPPs and have been enhancing the benefits (discount, lookback, etc.) in their existing ESPPs. We saw a decline in both the number of ESPPs and the benefits offered under ESPPs in the last survey, so I’m very excited to see if this trend really has turned around.
Automatic Exercise on Expiration: For the first time ever, the survey collects data on this emerging practice. I think it makes a lot of sense so I’m very interested to see what percentage of respondents have implemented this program.
Rule 10b51 Plans: Has the recent negative attention that Rule 10b5-1 plans have received from academics and the media impacted the use of these plans? My money says no; if anything, I expect usage to have increased a bit; we’ll see if I’m right when the survey results are published.
Stock Ownership Guidelines: The 2011 Stock Plan Administration survey saw a 35% increase in the percentage of companies that have stock ownership guidelines, a remarkable increase–far higher than we expected based on responses to the 2007 survey. If everyone that said they were considering implementing stock ownership guidelines in 2011 survey did actually implement them, close to 80% of all respondents will now have these guidelines in place.
Social Media: The topic du jour when it comes to educating employees these days is the use of social media (Facebook, Twitter, LinkedIn, etc.) I think these tools have significant potential for reaching younger employees. I look forward to finding out what percentage of respondents use them now and setting a baseline that we can use for comparison purposes in future years.
April 25 will be here before you know it and you are definitely going to want to have access to the full survey results. If you are an issuer, register to participate today. (Service providers that are not eligible to complete the survey can access the full survey results at no cost, provided they are members of the NASPP. This access is available to service providers only; issuer companies must complete the survey to access the full survey results.)
We’ve covered the range of insider trading cases in past editions of the NASPP Blog – ranging from employees gone rogue with inside information, to the accidental tipping off of friends during a Sunday brunch, to the SEC’s recent vigor in pursuing these cases. Just when I thought there were no more angles to cover with the SEC’s recent and ongoing crackdown on insider trading, I find myself surprised. It turns out the latest pair to settle SEC charges of insider trading are two husbands, both who gleaned inside information from their wives about their employers and used that knowledge to trade profitably.
Are Spouses Precluded from Trading?
I’ve read many an insider trading policy, and they often attempt to extend the boundary of insider trading parameters to spouses and other family members living in the same home. Even if a policy doesn’t address it, it pretty much goes without saying that a spouse shouldn’t be trading on any information received from their partner about the partner’s employer.
Sneaky Husbands
This week the SEC reiterated their no-nonsense approach to pursuing insider trading charges when they settled charges against two husbands. What strikes me is that, based on the facts available, the “tipping” in this case was so benign – virtually through the normal co-existence that occurs in a same-household relationship. In one case, a husband put two and two together as his wife talked about an upcoming acquisition. In the other case, a wife talked on the phone to her employer about the fact that the company would be missing their earnings target for the first time in 31 quarters, all while on a leisurely vacation drive to Reno with her husband. When they returned from vacation, the husband structured a series of trades to profit off the earnings miss. In both cases, the wives reportedly instructed their husbands to never, ever trade on any information shared or overheard.
Neither of the wives were charged in the SEC’s investigation. However, the penalties to their spouses weren’t cheap – both husbands settled with the SEC for double the amount of their profits in the case (a $300,000 settlement for one husband based on $150,000 in profits, and a $280,000 settlement in the other case, based on $140,000 in profits).
Tipping from Merely Existing?
Many of us in stock compensation can probably relate to the manner in which the inside information in these cases were obtained. How many times are we on a conference call at home, or explain to a spouse that we have to work late because of the “deal” that’s in the works? It probably is somewhat routine for our issuers, and not a far fetch for our service providers and consultants either. While both wives in these two cases seemed to do everything right by instructing their spouses not to trade, insider trading still happened. I’m not suggesting that all of our co-habitants out there are likely to trade on overheard information, but I’m guessing these wives didn’t think their husbands would do it either. Perhaps this is the right time to clip the articles on the matter and remind our spouses, significant others, roommates, and anyone else who is in a position to overhear or learn from our work habits, that the SEC is on a roll and the penalties can be significant. Not to mention the public embarrassment that occurs from having your name liked to insider trading in the public eye. Yes, it can happen to you. Just ask two wives in Silicon Valley.
Stock Plan Administration Survey The NASPP’s 2014 Domestic Stock Plan Design Survey (co-sponsored by Deloitte Consulting LLP) is now open for participation. If you are an issuer, you have to complete the survey by April 25 to access the full results. You’ll be sorry if you miss this chance: register to participate today.
Sign up for the NASPP’s acclaimed online Stock Plan Fundamentals course; the first webcast is April 16.
Register for the 22nd Annual NASPP Conference. The Conference will be held from September 29-October 2, 2014 at the Mandalay Bay in Las Vegas. Don’t wait–the price goes up again after May 9!
Beneficiary designations are a surprisingly hot topic these days, with many experts now suggesting that they are not a good idea for stock compensation arrangements. We’ve looked at this issue before in the NASPP Blog (“Did Steve Jobs Have a Beneficiary?,” October 13, 2011), but we recently published the results of a quick survey on practices in this area, so I thought it would be a good time to take a look at the topic again.
The Allure of Beneficiary Designations
When they work, beneficiary designations work very well. The company has clear instructions on what to do with the deceased employee’s awards and can pay those awards out relatively quickly, with minimal documentation from the beneficiary (perhaps just a death certificate, instructions on how to distribute the awards, and documentation to complete any required tax reporting).
Without a beneficiary designation, the awards transfer to the heirs in accordance with the rest of the deceased employee’s estate. Unless some sort of trust arrangement that includes the employee’s awards has been set up, this likely means that the awards will have to go through probate. Depending on the size of the estate, probate can be expensive, can require the assistance of an attorney to navigate, and can take a long time (note however, that many states have expedited and simplified probate processes for estates that are less than a specified amount).
When Beneficiary Designations Go Bad
The operative phrase in the section above is “when they work.” When beneficiary designations don’t work, things get ugly. Beneficiary designations need to be regularly updated for life changes (marriages, divorces, births, deaths, etc.). And they need to comply with applicable local laws–in the US, state laws can inhibit the effectiveness of beneficiary designations; outside the US, this is even more of a problem. Where the validity of a beneficiary designation is called into question, the matter will likely end up in court–which can be a lot more expensive and slower than probate. Of greater concern, where a company pays out an award pursuant to an invalid beneficiary designation, in some countries the company could be liable to the rightful heirs.
If you are going to allow plan participants to designate beneficiaries for their awards, you’ll need a process for collecting and tracking the designations. You also really should have a process to remind participants to update their designations periodically–otherwise someone’s stock awards could end up being paid out to an ex-spouse (as described in the blog entry noted above). And, particularly for non-US participants, you should have a process for verifying that the designations don’t conflict with local laws.
All of which seems like a lot of work for something that few participants will benefit from. In the NASPP’s recent quick survey on the topic, 87% of respondents reported that fewer than five participants die while holding outstanding awards per year.
Survey Says
How many companies allow beneficiary designations anyway? Well under half and sometimes as few as only one-third, depending on the type of award. Among respondents to our quick survey:
40% allow beneficiary designations for stock options
37% allow them for restricted stock/RSUs
32% allow them for performance awards
35% allow them for ESPPs
Note that for all four types of awards, there was a small percentage (less than 5%) of respondents that are considering or in the process of implementing beneficiary designations. The rest of the respondents do not allow them.
Of those that allow beneficiary designations and have non-US employees, 68% allow the designations for all of their non-US employees as well.
23% of respondents ask employees to update their beneficiary designations when they receive a new award and 12% ask for updates annually. 61% don’t ever ask employees to update their beneficiaries, which seems like a good way to get into a situation where you are paying out an award to an ex-spouse.
43% of respondents store paper copies of beneficiary designations in house, 19% have some sort of in-house automated or electronic tracking system, and 32% rely on a third party to track the designations.