It’s Baker & McKenzie week here in the NASPP Blog! On Tuesday we featured an interview with June Anne Burke and for today’s “Meet the Speaker” interview, we feature an interview with Denise Glagau, also of Baker & McKenzie, who will lead the session “Dividends, Equivalents and Stock Awards.” Here is what Denise had to say:
NASPP: What are a few key areas your panel will address with respect to your topic?
Denise: Key areas the panel will address include:
Tax and social insurance withholding and reporting on dividend/dividend equivalent payments;
Pros and cons of making dividend/dividend equivalent payments on unvested awards currently versus accruing the payment until vesting of the underlying award;
Advantages and disadvantages of making dividend/dividend equivalent payments into a brokerage account versus paying through local payroll;
How and why equity awards may be adjusted to account for a special dividend: and
Tax and regulatory considerations arising from the adjustment of equity awards due to a special dividend, including special considerations for tax-qualified awards.
NASPP: What is the biggest challenge companies face in administering dividend programs for awards?
Denise: One of the biggest challenges companies face in this area is administering payment of dividends/dividend equivalents on equity awards in an efficient and consistent manner while also limiting exposure for tax withholding/social insurance obligations around the globe. A related challenge is how to manage tax withholding/social insurance obligations on dividend/dividend equivalent payments where there are not similar obligations for the underlying award.
NASPP: What is the silver lining to paying dividends on awards?
Denise: The silver lining of this topic is that the payments we will be talking about provide a great benefit to award holders and if the proper legwork is done upfront and this benefit is communicated effectively, these payments themselves can be perceived as an added incentive to award holders without much work on the part of the issuer.
NASPP: What is your secret (or not-so-secret) superpower?
Denise: My (not-so-secret) superpower is that I do not need much sleep. I get this from my dad which used to be really annoying as a teenager trying to sneak in and out of the house–the man was always awake no matter what time it was–but now I have to thank him for this trait as it comes in handy in balancing a busy global equity practice and a satisfying family and personal life!
June Anne: This session will address the top ten most significant compliance risks in the drafting, design, implementation and ongoing administration of equity plans and how to avoid them. This is a multi-disciplinary panel, and therefore some of the risks covered may be a surprise to even the most experienced equity plan professional.
NASPP: What is the biggest compliance challenge companies face for their global stock plans?
June Anne: The biggest challenge that companies face is that of adopting policies, practices and procedures that streamline compliance and simplify the daunting task of staying in compliance on an ongoing basis.
NASPP: What is the silver lining to global stock plan compliance?
June Anne: The silver lining to this topic is that companies and providers can learn from the mistakes of others and implement recommended strategies to mitigate risk.
NASPP: What is your secret superpower?
June Anne: Extrasensory perception (or a guardian angel). This ability comes and goes. It saved my life once.
NASPP: Why is the topic of audit procedures particularly timely right now?
Takis: The finance and accounting space is undergoing a radical transformation and everyone even tangentially touching this space can benefit by understanding the change taking place. Accounting is becoming so much more than a recurring processing arm charged with just reporting the news every quarter. Historically, accounting’s scope of responsibility was tethered to getting numbers into the financials, and being right, of course… But as a result, nobody really cared whether highly talented professionals needed to spend hours using endless pivot tables to reach the goal line.
As auditors become increasingly sophisticated, award designs grow in complexity, and accounting is rebranding itself as much more than the arm that merely reports the news; a renewed focus on auditing stock-based compensation is essential. For one, audits now concentrate largely on the control environment in addition to the material accuracy of reported values. Additionally, the risks are higher than ever as accounting departments grapple with new award complexity while venturing to supply broader and better information to internal decision-makers from a management reporting perspective.
Strong audit processes are essential to accounting’s mission of growing its strategic value within the organization by supplying richer information to key stakeholders–both inside and outside the firm. Our session will equip participants to design more effective controls and help ensure that the release of accounting information, both inside and outside the firm, drives stability and understanding, instead of surprises and revisions.
NASPP: What common mistakes do companies make when auditing stock plan data?
Takis: Our session will contain a litany of best practices that have been developed based on experience of common failure points. But for now, let’s focus on a higher level mistake many companies make.
I would like to challenge us all to think bigger. Just because we have a process that gets the job done, is that really enough? As Jim Collins says, good is the enemy of great. Are our processes that are filled with pivot tables and vlookups good, or are they great? Can the process be quickly transitioned if the process owner was abducted by aliens? Can the process adapt quickly and without risk if award designs change? Internal control is all about imagining the “left tail” of possibilities–being imaginative about failure points and not rushing to conclude the process is “in okay shape.”
The biggest mistake I see companies making is being content with a process so long as it seems to generate materially accurate results. The opportunity here is to understand why things are done the way they are and why a more automated, flexible, reliable, faster, etc. procedure has not been put in place.
NASPP: What is the silver lining to auditing stock plans?
Takis: The silver lining is that as we strengthen our auditing procedures by implementing best-in-class auditing techniques (which include traditional testing methods and “softer” efforts to bridge information gaps between departments) there is considerable upside–including career upside. I know professionals who once did all the manual processing and were told that unless they made their processes more robust, more auditable, and less person-dependent, they could not be promoted. Similarly, I’ve met dozens of professionals who were branded as the “ASC 718 processors,” but reshaped their image within their companies, driving process stability and auditability so much that they could start generating more useful information for senior management–and all of a sudden management became interested and excited in the role they were playing.
Net-net, a solid audit program is the first step toward ridding the ASC 718 process of drama, risk, and ambiguity. From there, it becomes much more possible to focus on the deliverables from the process and the extent to which they are meeting the information needs of the organization.
NASPP: What is your favorite NASPP Conference memory?
Takis: I actually have two favorite NASPP memories. The first is one I experience every year, and that’s a rush of enthusiasm as I begin bumping into so many friends, colleagues, and business partners on the first day. I enjoy accounting, and I really enjoy business (hiring great people, training/developing, R&D, etc.), but more than all that I enjoy the personal relationships that are formed while doing this thing called business. There is nothing more exciting than the energy of reconnecting and rekindling friendships with the many great people I have come to meet through the NASPP.
My second memory was at last year’s conference when we hosted our first large client dinner in many years (previously, we operated as a subsidiary of a larger company). Our theme was “enter as strangers, leave as friends,” in an effort to get everyone to mingle and meet people they didn’t know at the start of the evening. It’s probably the Greek in me, but I really love facilitating networking, bonding, and the formation of new friendships. Seeing this happen was amazing.
NASPP: Why should Conference-goers attend your session?
Ellen: Our session focuses on administrative issues that we see arising from time-to-time that can catch the unwary off guard. However, our session is not just for stock plan administrators, but counselors as well. As a lawyer, I find that clients appreciate advice beyond the legal answer; we can add value by providing guidance on administrative and broker concerns. In addition, our panel aims to educate as well as entertain!
NASPP: What common mistake do companies make and how can they avoid it?
Ellen: A common mistake issuers make when granting equity compensation is not involving the right people when establishing a program or practice. Take for example, auto-exercise. In theory, a great concept from an accounting perspective and not a difficult exercise legally. However, you hear the urban tale of the issuer who spends all sorts of time, money and effort establishing the program and then to find out that the captive broker cannot (or will not) do so. If only they had asked the stock plan administrator first… Yes, I am shamelessly trying to score points with all of the stock plan administrators who are reading this interview.
NASPP: What is the silver lining to your topic?
Ellen: The issues that we will discuss are issues that do not arise on a daily basis, so they can be “gotchas” when they do. When one of these issues arises in your workplace, you can be the brilliant person on the team by being familiar with the issue, anticipating questions and having solutions. Most folks want be brilliant or at least create the appearance that they are.
NASPP: What is your secret (or not-so-secret) superpower?
Ellen: My not so secret superpower is the ability to make people laugh. Lawyering is serious business, but can be very dull without a bit of levity. I suspect that most are laughing at me, not with me, but that is a discussion for me and my therapist.
For today’s “Meet the Speaker” interview, we feature an interview with Rive Rutke of Deloitte Tax, who will lead the session “Equity & Employment Tax: A Marriage Made in Heaven.” Here is what Rive had to say:
NASPP: What are a few key areas your panel will address with respect to stock compensation and employment taxes?
Rive: Our panel will discuss some of the U.S. and global issues relating to audit exposure pertaining to equity compensation compliance. We will also highlight the challenges of managing global withholding obligations related to ASC Topic 718–and provide insight into how three issuer companies manage global withholding rates, in light of ASC 718.
NASPP: What common mistake do companies make and how can they avoid it?
Rive: A common mistake companies make is not adhering to the rules regarding the timing of payroll deposits–both in the US and globally. We are prepared to review some of these rules during our session so that common mishaps can be avoided.
NASPP: What is the silver lining to your employment taxes?
Rive: The silver lining is that once issuer companies are aware of the rules and regulations, positive action steps can be taken which can increase compliance and reduce risk.
NASPP: Tell us three things people don’t know about you.
Appropriate award valuation is critical to many aspects of a well-run stock compensation program. For today’s “Meet the Speaker” interview, we feature an interview with Jon Burg of Radford, an Aon Hewitt Company, who will lead the session “Equity Values of a Different Flavor,” which will discuss the purposes for which awards are valued and various approaches to valuation. Here is what Jon had to say about this topic:
NASPP: Why is equity award valuation a particularly timely topic right now?
Jon: The valuation of options and awards is not just an accounting concept; the need to know the value of equity is common for compensation planning, grant guidelines, pay-for-performance, and other purposes. Deciding on the appropriate method continues to be a controversial issue. Multiple valuation approaches exist depending on the application–and the differences in these sensitive valuations can be significant and lead to awkward or conflicting discussions with the board, shareholders and employees. Should there be convergence or consistency in valuations for accounting, HR, and other purposes or are there reasons to apply different approaches for different applications? This panel will provide an overview of some of the existing challenges and highlight current best practices, along with pros and cons of an attempted movement to standardize valuations across multiple surveys.
NASPP: How can stock plan administrators contribute to the valuation process?
Jon: Arm yourself with the knowledge and understanding of these varying valuation approaches. It is critical to understand how survey methodologies vary so your grant guidelines are developed on an apples to apples basis. Review the various disclosure examples using realized and realizable pay in order to know whether additional disclosure for your company is warranted.
NASPP: What is the silver lining to equity award valuation?
Jon: While there is plenty of confusion to go around, there is always opportunity. You can develop equity guidelines that are better aligned with the marketplace. You can tell a better and more accurate compensation story to your shareholders. You can make design changes to achieve certain goals with minimal impact to employee perceived value.
NASPP: What is your secret (or not-so-secret) superpower?
Jon: I have an inner Forrest Gump that can keep my legs moving for long periods of time.
NASPP: What is the most critical thing NASPP Conference attendees need to know about equity awards held by globally mobile employees?
Stuart: Tax authorities across the globe are becoming more and more sophisticated when it comes to understanding the most common equity vehicles available to globally mobile employees. Significant negative outcomes can occur, including financial statement impact, if the right process is not put in place.
NASPP: What common mistake do companies make and how can they avoid it?
Stuart: A common mistake organizations make when dealing with equity provided to expatriate employees is to forget about the employee once they have come off of assignment. Post-repatriation equity income should be reviewed for any host country tax implications.
NASPP: What is the silver lining to all of this?
Stuart: The equity process for expatriates is manageable and surprises can be avoided.
NASPP: Tell us three things people don’t know about you.
Stuart:
I once appeared on the show “Candid Camera” doing hopscotch on a sidewalk in downtown San Jose. I received $25 for that appearance.
I scuba dived in Tahiti, following a divemaster who was towing 1/2 of a marlin while sharks attacked it.
I played trombone for the UCLA Marching Band and was lucky enough to march in two Rose Bowl Parades and play at the follow on Rose Bowl games.
For today’s “Meet the Speaker” interview, we feature an interview with Megan Jasionis of Bank of America Merrill Lynch, who will lead the session “The Evolution of Equity Plan Design.” Here is what Megan Jasionis had to say:
NASPP: What are a few key areas your panel will address with respect to your topic?
Megan: Our session will review how granting practices have shifted over time from options, to restricted awards, to performance awards. We will focus on how companies can stay current and competive with their plan design. It is critical that education, communication and measurement components evolve along with the changing plan designs. Hear how to make it all work from three great companies!
NASPP: What common mistake do companies make and how can they avoid it?
Megan: When looking to implement a new plan design, it is critical to have all pieces of the puzzle in place. From consulting with the administration team, to communications, grant agreements, financial reporting and compliance–every aspect needs to be represented. Let us show you how to make it all come together!
NASPP: What is the silver lining to your topic?
Megan: With the right planning and the appropriate teams in place and accounted for, evolving your plan design doesn’t have to be painful!
NASPP: What is your favorite NASPP Conference memory?
Megan: Being in New Orleans! It was a great time along with great sessions!!
NASPP: What is the most critical thing NASPP Conference attendees need to know about your topic?
Wendy: Proxy strategy is not one size fits all, and smaller companies–whether small reporting companies, emerging growth companies, or mature small cap companies–may have to work harder, and more creatively, to communicate their compensation message. Smaller companies face very different compensation issues than larger cap companies, including:
Delivering equity compensation value when stock price is less than a few dollars and the stock is thinly traded or volatile,
Creating meaningful cash-based performance incentives when budgets are tight, and
Recruiting in a talent pool that includes both pre-IPO and large cap executives.
Smaller companies must then craft an individual approach to communicating their decisions in the proxy, given the scaled down reporting rules applicable to SRCs and EGCs, the different shareholder base who will be reading the proxy, and the tests designed by proxy advisory services that don’t account for the special circumstances of small cap companies. This panel has first hand experience helping smaller public companies make the hard decisions on compensation design, understand the reporting optics of these decisions, and then effectively communicate these decisions in the proxy and in pre-meeting shareholder outreach campaigns.
NASPP: What common mistake do companies make and how can they avoid it?
Wendy: Smaller public companies often feel compelled to use buzz words like “performance” or follow the compensation decisions or disclosure practices of other companies who are current or perhaps aspirational peers. In doing so, smaller companies lose the real message of their program and sometimes come across as talking the talk but not walking the walk. To have a meaningful proxy disclosure, the compensation team must be willing to have open, frank, fully informed discussions with management and the board, providing information beyond benchmark numbers and statistics on the frequency of a given policy or disclosure. At the time compensation decisions are made, smaller companies must consider how their decisions will be viewed not only one or two years from now but as part of a longer term trend of the direction of their executive compensation program.
NASPP: What is the silver lining to your topic?
Wendy: Compensation strategy is like a giant ocean liner. Rarely is it too late to avoid the iceberg ahead–but it does take time, good tools, and lots of preparation to steer the ship onto a different course.
NASPP: Tell us three things people don’t know about you.
Wendy:
After law school, I drove in an 18-wheeler cab–without a trailer attached–from Seattle to Banff, and the Canadian border patrol didn’t know what to make of it.
I learned freestyle wrestling in college from US Olympic team members as a club sport and I can still perform a headlock-hiptoss (although I risk throwing out my back at this point).
I still remember, from my 9th grade final exam, and can sing a glowing rendition of “La Marseillaise” in French. But I can’t remember how to order dinner or have even a basic conversation.
New this year, we are featuring “Meet the Speaker” interviews with panelists for the upcoming 21st Annual NASPP Conference. This 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.
NASPP: What are a few key areas your panel will address with respect to your topic?
Berni: Stock plan professionals are being asked to do more with less. And, at the same time, are expected to enhance collaboration and ensure equity plan are compliant worldwide. The only way to be successful is to centralize and organize source content and business knowledge. Our panel of experts will share how they use technology to do just that.
NASPP: What is the biggest challenge companies face with respect to this issue?
Berni: Document and version control is one of the biggest challenges. Let’s use a stock plan for an example. In the past, when I joined a new company or when I consulted, one of the first things I would do is read through all the active stock plans. I would try to find the document(s) on my own… after an hour of searching through shared folders I might have found multiple copies of the plan. To ensure I was working off the most recent version, I would have to ask someone. Turns out the most recent version was on the person’s laptop. And when there’s a remote workforce, sharing documents and knowledge is even more of a challenge.
NASPP: What are some horror stories you can tell about your topic?
Berni: Some horror stories include missed deadlines, working off the wrong set of information, or not knowing what has been done in the past. Each of these resulted in companies needing to pay large fines or legal fees. In one case, a company paid for a private letter ruling twice, because no one on the team knew the history and there wasn’t a record of the original filing to be found. Our panel will share remedies for managing key processes.
NASPP:Tell us three things people don’t know about you.
Berni: Wow…how do I answer this question?
I’m older than I look, thanks to my hair stylist.
I direct a dance company. Yes, when I’m not a stock plan professional, I’m a dancer/choreographer.
My favorite color is red, but people think it’s teal, since I tend to wear teal a lot!