Our popular “Meet the Speaker” series, featuring interviews with speakers at the 22nd Annual NASPP Conference, is a great way to get to know our many distinguished speakers and find out a little more about their sessions in advance of the Conference.
For today’s “Meet the Speaker” interview, we feature an interview with Christine Zwerling, CEP of Stock & Option Solutions, Inc., who will lead the session “Extreme Makeover: ESPP Edition.” Here is what Christine had to say:
NASPP: What is a common misperception about ESPPs?
Christine: Many companies believe that ESPP participants sell their shares within days or weeks of the purchase date. Fidelity has provided statistics from a recent survey proving this misconception is wrong. We have lots of survey data on perceptions of ESPPs and program trends to share.
NASPP: What actions should companies be taking now with their equity programs?
Christine: Companies should be evaluating the ROI on their equity plans; many will find that an ESPP provides ROI with engagement and cost savings over other traditional programs. ESPP programs are a cost-effective way to encourage company ownership at all ranks through a program where employees actively decide to purchase shares (as opposed to being given shares), providing employees with a sense of empowerment and engagement.
NASPP: What is the silver lining to ESPPs?
Christine: ESPPs virtually pay for themselves. Remember, participants are paying for the shares—so these programs bring in money. If an employee does sell the shares early, the company receives a tax deduction; plus, ISS voting guidelines generally automatically recommend voting FOR IRC§ 423-compliant plans.
NASPP: Tell us three things people don’t know about you.
Christine:
I hate pickles and anything pickled (why do delis insist on pressing a pickle right up against a perfectly good sandwich!?);
I attended 12 different schools; and
Both of my sons joined our family through domestic open adoption.
About the NASPP Conference
The 22nd Annual NASPP Conference will be held from September 29-October 2 in Las Vegas. This year’s program features 60+ sessions on today’s most timely topics in stock compensation; check out the full agenda and register today!
Build Better Relationships
A new NASPP Career Corner Blog from Andrea Best suggests four ways to build better relationships in your career.
To Do List
Here is your NASPP to do list for this week:
Check out Andrea Best’s newest entry in the NASPP Career Corner Blog: “4 Ways to Build Better Relationships on the Job.”
Make your hotel reservations for the 22nd Annual NASPP Conference. The hotel is nearly sold out; don’t wait or you’ll end up having to stay at a different hotel.
Check out the fantastic program for the 22nd Annual NASPP Conference. The Conference will be held from September 29-October 2, 2014 at the Mandalay Bay in Las Vegas.
Our popular “Meet the Speaker” series, featuring interviews with speakers at the 22nd Annual NASPP Conference, is a great way to get to know our many distinguished speakers and find out a little more about their sessions in advance of the Conference.
For today’s “Meet the Speaker” interview, we feature an interview with June Anne Burke of Baker & McKenzie, who will lead the session “Top 10 Most Expensive Mistakes with ESPPs.” Here is what June Anne had to say:
NASPP: Why are ESPPs a particularly timely topic right now?
June Anne: After a decline in popularity of ESPPs following the change in accounting treatment under US GAAP circa 2004, ESPPs are making a comeback. Many companies that have reduced the size of the population eligible for equity incentive awards (such as stock options and restricted stock units) over the last several years sense that something is missing: namely, the opportunity to purchase company stock at a discount, employee focus on company financial success and/or identification with the parent company. Further, with companies continuing to expand internationally, we are increasingly seeing companies implementing ESPPs on a global basis. We now have had several years since the regulations under IRC Section 423 were amended, including changes that help facilitate a global ESPP offering, so it’s a good opportunity to take stock of the issues companies face when designing and implementing their ESPPs—and, of course, ways to avoid them.
NASPP: What common mistake do companies make with global ESPPs and how can they avoid it?
June Anne: Many companies fail to review their corporate tax structure when deciding which entities to include in the ESPP, particularly when an ESPP is offered globally and certain countries are excluded. In addition, when adopting country-specific terms or rules to comply with non-U.S. laws (e.g., inclusion of part-timers to comply with a European Union directive), it is essential to understand the ownership structure and tax status of each employer company so as to avoid running afoul of Section 423’s employee coverage or equal rights and privileges requirements. If these key requirements of Section 423 are not met, the tax-qualified status of options granted under the plan could be in jeopardy. As companies tend to change their corporate structure all the time, companies need to review their corporate tax structure in advance of every offering period, when designating the subsidiaries eligible to participate in the ESPP. There are other strategies to minimize risk in this area, but you’ll have to come to our session to find out what they are!
NASPP: What is the silver lining to your topic?
June Anne: The silver lining is that it is possible to implement an ESPP globally without running afoul of Section 423 and the varying legal requirements around the globe. We’ll definitely be diving into a few ESPP horror stories in our session, so perhaps the biggest silver lining is the sense of relief our audience will feel at (hopefully) not having had to face such scenarios in their own work lives! And for those that have lived through ESPP mistakes, the silver lining is the lesson learned and the errors they won’t repeat.
NASPP: What is something you learned from the NASPP?
June Anne: I have learned a number of things from attending NASPP conferences and webcasts over the last several years, and by logging onto the NASPP website. Relevant to our session, I attended the “IRS and Treasury Speak” session on the proposed Section 423 regulations and the session on the final regulations the following year, and found these sessions to be very informative.
About the NASPP Conference
The 22nd Annual NASPP Conference will be held from September 29-October 2 in Las Vegas. This year’s program features 60+ sessions on today’s most timely topics in stock compensation; check out the full agenda and register today!
Here’s what’s happening at your local NASPP chapter this week:
Denver: Usman Zafar of EASi presents “Financial Reporting Best Practices.” (Tuesday, August 26, noon)
Sacramento: Dee Crosby of the CEP Institute presents on all the good things CEPI has been working on, including the GPS program. (Tuesday, August 26, 11:00 AM)
Florida: Michael Palermo of Fidelity and Liz Stoudt of Radford present “Show Me The Money—Minimizing P&L Impact Without Impacting People.” (Thursday, August 28, 8:30 AM)
Houston: Anthony Eppert of Winstead presents “How to Increase the Life Expectancy of the Equity Plan’s Share Reserve and other Hot Topics.” (Thursday, August 28, noon)
Our popular “Meet the Speaker” series, featuring interviews with speakers at the 22nd Annual NASPP Conference, is a great way to get to know our many distinguished speakers and find out a little more about their sessions in advance of the Conference.
For today’s “Meet the Speaker” interview, we feature an interview with Takis Makridis of Equity Methods, who will lead the session “Accounting Principles for Stock Plan Administrators.” Here is what Takis had to say:
NASPP: What is a common misperception about ASC 718?
Takis: ASC 718 can feel very arbitrary. There’s a laundry list of “rules” to memorize, which is stressful and contributes to the feeling that ASC 718 just amounts to a bunch of hocus pocus. Our topic is NOT about reiterating all those rules so that people can memorize them just a little bit better. Rather, our session is motivated by the view that ASC 718 is not a laundry list of arbitrary rules. Conventions like dynamic forfeiture rates, equity classification versus liability classification, deferred taxes, and the floor provision tie back to a conceptual framework in accounting. Our goal is to share key aspects of that conceptual framework—which is far bigger than ASC 718—so that all the ASC 718-specific conventions can be understood as existing within a broader accounting policy ecosystem. By understanding the concepts that lead to the rules, our hope is that the rules are not only easier to implement, but also that grey areas can be more readily resolved. This is how we hope to make our presentation different and meaningful.
NASPP: What actions should companies be taking now?
Takis: Companies should take a careful look at their accounting calculations and procedures with an eye toward WHY things are being done the way they are. Link every calculation back to a principle in ASC 718. When there is not a clear principle to link to (e.g., an elaborate performance-based award), what is the reasoning and documentation in support of the current approach? Does it make sense in light of the accounting concepts underpinning ASC 718? “We do it this way because we’ve always done it this way” can be a very dangerous strategy.
NASPP: What is the silver lining to ASC 718?
Takis: ASC 718 makes a lot of sense! <Cringe> ASC 718 is much more “principles-based” than many other standards in US GAAP. Of course the standard is filled with rules, but an effort was made to base those rules off fundamental accounting principles. When you can see the rules as stemming from the broader concepts underlying US GAAP, it becomes much easier to resolve complex cases involving a lot of grey and no specific guidance.
NASPP: What is something you learned from the NASPP?
Takis: The NASPP does an incredible job of bringing experts together from very different disciplines. This is extremely cool and also rare, but it leads to far more holistic perspectives. When we all leave the Conference and go back to “the real world,” it’s essential that we have the tools to look at unique problems holistically, and I feel the NASPP has challenged me to do that in a productive way.
About the NASPP Conference
The 22nd Annual NASPP Conference will be held from September 29-October 2 in Las Vegas. This year’s program features 60+ sessions on today’s most timely topics in stock compensation; check out the full agenda and register today!
NASPP Conference Hotel Is Nearly Sold Out
Don’t wait any longer to make your hotel reservations for the 22nd Annual NASPP Conference; the hotel is very close to selling out. Call (877) 632-9001 to make your reservations and mention the NASPP Conference to get the best rate. If the hotel tells you that our room block is sold out, be sure to ask if there are rooms available outside of the block. Don’t wait; we expect the hotel to be completely sold out! If you have trouble making your hotel reservations, contact us at naspp@naspp.com.
To Do List Here is your NASPP to do list for this week:
Make your hotel reservations for the 22nd Annual NASPP Conference. The hotel is nearly sold out; don’t wait or you’ll end up having to stay at a different hotel.
It’s not too late to participate in our newest online program, “Performance Award Essentials.” All of the webcasts have been archived for you to listen to at your convenience.
Check out the fantastic program for the 22nd Annual NASPP Conference. The Conference will be held from September 29-October 2, 2014 at the Mandalay Bay in Las Vegas.
Our popular “Meet the Speaker” series, featuring interviews with speakers at the 22nd Annual NASPP Conference, is a great way to get to know our many distinguished speakers and find out a little more about their sessions in advance of the Conference.
For today’s “Meet the Speaker” interview, we feature an interview with Marsha Tepper of CompIntelligence, who will lead the session “Manual Manipulation Madness.” Here is what Marsha had to say:
NASPP: Why is the topic of manually preparing calculations and reports so timely right now and how can people struggling with this benefit from your session?
Marsha: Every individual working in stock plan has challenges with the amount and type of manual work that must be done. Even the best administration platforms are not flexible enough to satisfy all the processing, reporting and communication needs. This session will spotlight two well-known large companies and what they are doing to reduce manual work in their stock plan departments. I think this topic will be informative to anyone struggling to find cost-effective solutions and help them take a step back and really look think about how they do their job today.
NASPP: What common mistake do companies make when it comes to manual calculations?
Marsha: One common mistake is to convince yourself that you are too busy to review how you work. So many of us say “I am too busy to figure out how to do this task differently, I just need to get the work done.” It is a project to change but usually very worthwhile.
NASPP: What is the most innovative solution/response you’ve seen to automate a manual process?
Marsha: I believe we are going to talk about one of the most innovative solutions I have seen to reduce manual work during our session. We will discuss how a very, very manually intensive process was automated by creating a rules-based engine to analyze the data.
NASPP: What is something you learned from the NASPP?
Marsha: I learned how to play roulette at a NASPP Conference in Vegas years ago! Seriously, I have learned that we are a small community of dedicated professionals all excited and passionate about stock plans. There are some people I see only at the NASPP Conference but I feel like they are my friends as we are all part of this industry. I learn something new every Conference and I have been in this industry 30 years!
About the NASPP Conference The 22nd Annual NASPP Conference will be held from September 29-October 2 in Las Vegas. This year’s program features 60+ sessions on today’s most timely topics in stock compensation; check out the full agenda and register today!
Connecticut: AmyLynn Flood of PwC, Stephen Antuna of GuideSpark, and Heather Royce of The Priceline Group present on educating stock plan participants. (Wednesday, August 20, 9:30 AM)
Las Vegas/Phoenix: The Las Vegas and Phoenix chapters host a joint webinar on “New Frontiers: Emerging Trends in Employee Equity Plan Engagement and Education,” co-Presented by Frank Guido of Solium and John Wolff of GuideSpark. (Wednesday, August 20, noon)
Orange Co./San Fernando Valley/San Diego: The Orange Co., San Fernando Valley, and San Diego chapters host a joint webinar on “What I did on My Summer Vacation: Top 10 Stock Administration Tips to Make the Most of Your ‘Downtime,'” co-presented by Tami Bohm of Radian, Jen Baehr of the NASPP, and Jen Tardif of Solium. (Wednesday, August 20, 11:30 AM)
Salt Lake City: John Ludlum of Holland & Hart and Jonathan Golightly of Fusion-io present “The Tax Man Cometh: Hot Items for an IRS Payroll Tax Auditor!” (Wednesday, August 20, noon)
Michigan: Stephanie Glashow of E*TRADE presents “Inside the Participants’ Minds: How Well Do They Understand Their Equity Compensation Plans?” (Thursday, August 21)
Seattle: Ken Stoler, Matthew McKittrick, and Kari Piehl of PwC present “Equity Compensation Viewpoints Other than Stock Administration!” (Thursday, August 21, 11:30 AM)
This is a topic I’ve covered in the past: blatant insider trading; colorful schemes to profit from material, non-public information; even the SEC’s recent and ongoing crackdown in this area. This week I was hit with two stories and it was a sign that I had to, once again, share. Even if you’ve read other blogs on insider trading, you’ll want to stick with this one. Today’s has all the makings of a James Bond movie: pre-paid disposable cell phones and cash traveling in unmarked envelopes. I almost have to wonder what the bigger draw is for those who engage in insider trading: the possibility of illegally making a lot of money and getting away with it or the (albeit short) thrill of taking covert spy-like steps in an attempt to conceal your trail?
It’s an Inside Job
First, let’s get to topic du jour number one: a study that is being published this month that seems to conclude that a significant number of information leaks that lead to insider trading come from, well, insiders. Okay, okay. That’s not a story, I know. We all know that. What the study actually pointed to was the seemingly high number of information leaks that appear to be coming from state and regulatory agencies—those who should be protecting the sensitive information in their care. An article on the study quotes one of the researchers:
“Our findings are somewhat controversial in that we’re saying the presumed protectors of the shareholders and general public interests appear to be using their positions to their advantage,” Zhao said. “The evidence shows it is happening. There is more insider trading within regulated firms than within unregulated firms. There is very, very strong indirect evidence that this is due to people involved in the regulatory agencies.”
The best way to articulate this is to use an example. Let’s say there’s a pharmaceutical company seeking FDA approval for a new drug. In theory, nobody at this point knows if the drug will be approved or not. But a couple of days before the decision is announced, there is a spike in trading of the company’s stock. It appears that somebody did know the outcome and leaked the information. In this hypothetical, the leak is likely from the regulatory agency that was tasked with approving the drug, not from the company itself.
Numerous factors were looked at to reach these conclusions. Researchers say they evaluated factors like cumulative abnormal return and short sale data.
Let’s face it, nobody wants to be in the middle of an insider trading investigation. Regardless of who acted on the information, how they got it, and why it happened, it’s still cumbersome to participate in an investigation, it diverts time and attention away from the normal course of business, and creates lots of publicity that the company would probably prefer to avoid. If it’s beyond our control, how do we mitigate against the possibility of an investigation? That’s the big question.
Insider Trading—James Bond Style
Sometimes smart people do bad things. They just do. And the insider trading case in the media this week falls into that category. I can’t do the full story justice in today’s blog, but it’s worth a read. Seriously, I could see a made for TV movie coming out of this one. A Microsoft employee, dad of four kids, making $130K a year, is struggling to pay his kids’ private school tuition. So what does he do? He concocts an insider trading scheme in which he passes along information to a day trading former colleague who then trades on their behalf to the tune of $400,000 over time. Using prepaid cell phones, plain envelopes to deliver cash profits, and other covert tactics, the plan unfolds. The first trade goes off without a hitch. Later there is a second, then a third. They get so excited they even talk about starting their own hedge fund using their newfound fortune. Eventually (and can I say predictably—after all, there is an insider trading crackdown going on), he gets caught by the SEC. Yes, it can happen to you. Long story short, all the painstaking steps taken to hide the scheme didn’t work. He got caught, his partner got caught, and both are going to jail. The Microsoft employee was sentenced to two years in jail. His partner got 18 months. One thing that stood out to me: the former Microsoft employee was very candid in saying that yes, he knew this was wrong. He even described his struggle with the scheme and how he rationalized it to himself saying that if members of Congress could do it, he could too. It’s not often you get to hear a full admission in these cases, nor the thought process behind it.
Many of us come into contact with material, non public information routinely. It’s the nature of our work. While it’s clear we can’t control others—our colleagues or even the regulators who engage with some of our firms—we can control ourselves. It’s never going to be worth it. I’ve covered the gamete of insider trading cases in this blog, mostly because it seems there is a new angle every time. The people getting caught doing this are not just CEOs and heavy hitters. Husbands have gleaned inside information from their unknowing wives. In a prior blog, I noted how the U.S. Government tracked an insider trading suspect to Hong Kong and extradited him back to face the music in the U.S.—all over a $7,900 trade. I continue to cover this topic because smart, ordinary people with decent jobs, families and seemingly good upwardly mobile career prospects keep getting entangled in these schemes. So I will beat the drum a little bit more. Insider trading is never going to be worth it. We must be vigilant about the information in our care: the data we hold, the information we receive. The vast majority of us are too ethical to deliberately trade on inside information, but as I’ve highlighted before, tipping can often be unintentional. I leave you with a phrase of the day to consider: “persistent vigilance.”
NASPP Conference Hotel Is Nearly Sold Out
Don’t wait any longer to make your hotel reservations for the 22nd Annual NASPP Conference; the hotel is very close to selling out. Call (877) 632-9001 to make your reservations and mention the NASPP Conference to get the best rate. If the hotel tells you that our room block is sold out, be sure to ask if there are rooms available outside of the block. Don’t wait; we expect the hotel to be completely sold out! If you have trouble making your hotel reservations, contact us at naspp@naspp.com.
It’s Not Too Late to Learn About Performance Awards
It’s not too late to get into the Performance Awards Essentials course. The first webcast has been archived for you to listen to at your convenience. Register today so you don’t miss the next webcast on Thursday, August 14.
To Do List
Here is your NASPP to do list for this week:
Make your hotel reservations for the 22nd Annual NASPP Conference. The hotel is nearly sold out; don’t wait or you’ll end up having to stay at a different hotel.
Register for our newest online program, “Performance Award Essentials.” Don’t miss the next webcast on August 12.
Check out the fantastic program for the 22nd Annual NASPP Conference. The Conference will be held from September 29-October 2, 2014 at the Mandalay Bay in Las Vegas.