I realize the title of my blog is somewhat broad – I mean, I’m guessing that highly paid CEOs have a lot in common (a nice office, fancy cars, access to private jets, world travel…). Alright, daydreaming aside, I’ll kill the suspense and answer my own question. In today’s blog I’m angling for an answer along the lines of “at least $95M each in income last year from stock compensation”.
With a rallying stock market, a legendary IPO and other favorable factors, the 10 most highly paid CEOs in 2012 (based on a recent poll by GMI Ratings – a corporate governance rating group) all earned in excess of $100M. The top two in that group earned in excess of a billion dollars. “Ah, so what?”, I thought. Then I looked a little closer and realized that that largest cash bonus in that group was $9.5M. The landslide majority of that compensation all came from stock compensation – both restricted stock and stock options.
It’s been a banner couple of years for executive pay. Once again, equity compensation appears to be squarely on top of the executive compensation pie. Of course the concerns about disproportionate gains (executives who are winning big while shareholders still are not) have surfaced, too. I’m going to avoid that discussion today, but if you’re interested in more on that topic, see Broc Romanek’s recent blog. Remember, the GMI Ratings information reflects 2012 compensation. With the stock market soaring, it seems that 2013 may even outpace 2012 in terms of realized gains on stock compensation.
When I start to see such record gains from stock compensation, and the corresponding publicity, I think about several things that stock administrators should consider:
Prepare for trading activity. As year-end draws near and the stock market is going gangbusters, this seems to be the perfect combination for increased trading activity from executives. Even those with 10b5-1 plans may still lead to increased activity – if the 10b5-1 plan was based on a series of limit orders, those limits may execute quickly in an up market. Tax and financial advisers may also encourage executives to liquidate some of their position for one reason or another. This means there could be a surge in executives looking to trade in the coming weeks (requiring availability for pre-clearance procedures, and assurance the executive knows who to contact to execute the transaction).
Consider whether there will be say-on-pay considerations for your upcoming proxy season. Is your company up for a say-on-pay vote this coming proxy season? With record executive compensation, there is bound to be scrutiny as to how those gains compare to shareholder returns. This opens the window to more of a microscope when the say-on-pay filter is applied. Even if you don’t get overly involved in the proxy preparation, given that a huge portion of executive compensation may have come from stock option or restricted stock transactions, you may need to be more involved in providing information for the disclosures. Now, for those who yawn at the mention of say-on-pay, let me just go tangential for a second to say that as of last week, there were 64 companies so far this year with a failed say-on-pay vote – already exceeding the 61 failures in all of 2012. So this is not an area where bygones have become bygones.
Is it time to beef up year-end communications? Have you been considering sprucing up the old examples you use in your year-end communications? With an up stock market, I’m guessing the equity compensation windfalls may not be limited to just executives. With more employees cashing in on market gains, they are bound to be more interested in your year-end communications. Now’s the time to consider enhancing those communications with more detail and timely examples in order to proactively address employee questions. Remember, this is the first year some of those quirky taxes (like the additional medicare withholding rate) kick in, so employees may not be fully aware of how they may be or have been affected by these changes.
Who doesn’t love a good stock market rally? As keepers of the stock plans, this is what we hope for when we issue those grants and/or awards. Try to keep that in mind during those times when volume of transactions is up, and more year-end preparation is needed.
Across my desk this week came the latest report from Equilar, an executive compensation data firm, on equity trends. In their 2013 Equity Trends Report, key findings included upticks in the use of restricted stock and performance shares, and a slight downturn in the use of stock options. I’ll highlight a few of the observations in today’s blog.
Trending Now
The Equilar report analyzed the equity practices in S&P 1500 companies that are publicly traded and have at least 6 years of disclosures (resulting in a pool of 1,327 companies). Some of the notable findings include:
Restricted stock awards are at an all-time high, with 92.8% of the companies issuing restricted stock in 2012 (compared to about 80% back in 2007). I couldn’t find any breakdown in the report between the use of RSAs vs. RSUs – so for purposes of this analysis the term “restricted stock” appears to encompass both types.
Stock options continue to decline in use. Equilar reports that over the past 6 reporting years (2007-2012), the number of companies reporting that they grant stock options has decreased to 65.2% from 78.5%. The size of the median stock option grant has also decreased for three straight years in a row, continuing a trend we’ve seen over the last decade (only varied by a blip in 2008 and 2009 when companies increased grants to compensate for market conditions). Although there has been a continued downward trend in this area, I personally believe that stock options will continue be mainstream – I don’t see them just riding off into the sunset – at least not in the near term.
Performance shares keep rising in popularity. This has been an ongoing trend, so no big surprise here. The report indicates that 61.8% of the S&P 1500 CEOs received performance grants in 2012, compared to 55.8% in 2011. I expect we’ll continue to see upward mobility in those numbers, year over year.
The Equilar report does cover additional topics of interest, such as trends in dilution and volatility rates. You can access the full report on Equilar’s website. This report affirms some of the trends we’ve observed, and we expect these trends will continue to gain upward (or downward, in the case of some of the stock option trends) momentum in the coming months and years.
In today’s entry I highlight a few articles that are available on the NASPP website that I think are particularly valuable. Many of these articles are updated on an annual basis; together they comprise the core foundational knowledge necessary to be proficient in stock compensation.
Restricted Stock and Units: The article “Restricted Stock Plans” covers just about anything you could want to know about restricted stock and unit awards and is updated annually.
ESPPs: “Designing and Implementing an Employee Stock Purchase Plan” takes an in-depth look at the regulatory and design considerations that apply to ESPPs, particularly Section 423 plans. This is a reprint of my chapter in the NCEO’s book “Selected Issues in Equity Compensation” so it is updated annually.
Securities Law: Alan Dye and Peter Romeo’s outlines of Rule 144 and Section 16 provide great overviews of these areas of law and are also updated annually.
The IRS has been busy on projects related to stock compensation lately (see “Dividends and Section 162(m),” July 10, 2012, and “Section 83 Update,” June 12, 2012). Their latest project is a sample Section 83(b) filing, something Stephen Tackney and Thomas Scholz, both of the IRS, had alluded to being in the works at last year’s NASPP Conference.
Rev. Proc 2012-29 provides a sample Section 83(b) election, along with examples clarifying the tax treatment that applies when the election is filed. See the NASPP alert “IRS Issues Sample 83(b) Election Form” for more information.
A Quick Review
Section 83(b) elections can be filed by employees when they receive stock that is subject to forfeiture and transferability restrictions. The most common arrangement in which employees would receive stock like this is a restricted stock award. A less common arrangement is an early-exercise stock option, under which employees are allowed and choose to exercise prior to vesting. Normally stock acquired under these arrangements is taxed at vest; filing a Section 83(b) election accelerates the taxable event to the grant/exercise date.
The election has to be made relatively quickly–within 30 days of when the stock is transferred to the employee–and must contain specific details about the transaction for which it is made. There’s not a lot of room for error here–miss the 30-day deadline and you are out of luck.
Incomplete Filings?
I was surprised at last year’s Conference to hear that the IRS was working on a sample 83(b) election. I had assumed most companies assisted employees wishing to make the election, ensuring that their elections are complete. But, given the Rev. Proc, now I’m not so sure.
I don’t know this for a fact, but I have to believe that the IRS issued the sample election because they receive a high number of incomplete filings and this is an effort to mitigate the problem. This is an area where you may want to take action to protect your employees. I think it’s a best practice for companies to provide a form that employees can use to make the election and to review their elections before they file them, just to make sure they’ve completed the form correctly. An incomplete or incorrect filing could be a mess if the error isn’t caught before the 30-day deadline. In a worst case scenario, the entire election could be considered invalid.
Note, however, that I never recommend that companies make the election on behalf of employees. Leave the responsibility for actually submitting the election in employees’ hands so that you don’t bear any responsibility if (or should I say “when”) elections aren’t mailed on time.
I’ll never forget a stock plan administrator telling me about starting a new job and opening a drawer in the prior stock plan administrator’s desk only to find a folder filled with Section 83(b) elections that the company had promised to file on behalf of employees over the past year and that had never been mailed. It was a private company and the elections were for early-exercise options that had been exercised at grant. If they had been filed on time as the company had promised, the employees would not have recognized any compensation income on their options. It still makes me a little sick to my stomach to think about it. Don’t do that! Make the employees mail their own elections.
More at the NASPP Conference
Attend the panel, “The IRS Speaks,” at the 20th Annual NASPP Conference to hear more about this Rev. Proc. as well as other rule-making activity that the IRS has completed this year–and hear what’s on tap for next year.
Full value awards have been a commonplace in our world of stock compensation for a while now. Yet, it seems there is always something new to learn when it comes to administering these vehicles. In fact, navigating the complexities of restricted stock units and awards is still such a hot issue that we’ve dedicated a Pre-Conference session this year, Advanced Issues in Restricted Stock, to the topic. One thing in particular that I’ve always found particularly annoying in administering restricted stock awards is something small in size and, if not approached thoughtfully, big on headaches: par value.
Par Value, Defined
The par value of a stock has no relation to a stock’s market value and, frankly, is a fairly outdated concept — initially introduced back when the markets were highly unregulated. In essence, the par value of a stock is the nominal value, which is determined by the issuing company to be its minimum price. Par value also has accounting purposes. It allows the company to put a de minimis value for the stock on the company’s financial statement.
In today’s world, many common stocks don’t have par values. Yet, there are still many that do (usually only in jurisdictions where par values are required by law). A typical par value is representative of the smallest quantity of money available, or a fraction thereof (e.g. 1 cent, or a fraction of a cent). Many states do not allow a company to issue stock below par value.
Par Value and Restricted Stock Awards
In administering restricted stock plans, there are a number of considerations around this pesky par value. Since the par value is the minimum acceptable price for shares of the company’s common stock (for companies subject to par value requirements), then, in theory, payment of par value must be collected from the employee when the company issues a restricted stock award.
1. Establish a collection method for par value: how will the company satisfy the obligation to collect the par value? The two most common methods today (at the discretion of the company and the language incorporated into the stock plans) are issuing treasury shares, and use of “past services”. The most common method is use of treasury shares. I’m guessing this is because since treasury shares have been previously issued into the market place (before the company bought them back on the open market); the idea is that the par value requirement has already been satisfied. By the time the company uses these shares to fund the restricted stock plan, they are not subject to the par value requirement. The second most popular choice is to use past services. Note that if you plan to use this method, you’ll need to ensure you use this for current employees who have a service history and not for new hires (since a newly hired employee wouldn’t have any history of service with the company). A small minority of companies use “future” service in satisfaction of par value, and an even tinier number collect cash.
2. Be sure to calculate the proper gain for income tax reporting purposes: depending upon with method you use to collect par value, you’ll calculate the “income” to be reported on the employee’s W-2 slightly different. If the employee paid the par value in cash, then it’s deemed to be a literal “payment” for the shares and the cost basis for the shares would be equal to the par value per share.
EXAMPLE: Par value is $.01 per share and an employee vests in 1,000 shares
Fair market value at vest is $25
$25 – $.01 = $24.99 per share of income
Total income on W-2: $24,990
If the employee satisfies the par value obligation using “past services”, then no cost basis is applied to the shares. One rationale I heard for this is that since the entire award has been issued as consideration for past services, you don’t make a distinction between the portion of services attributable to the par value and the balance of the award value. In the example above, if par value had been satisfied using past services, then the full $25 per share would be considered income.
3. In some cases, refund par value: If the employee has paid the par value in cash, you’ll need to remember to refund the par value payment if the shares are forfeited. Ideally it would be nice to include the refund in the employee’s last paycheck in order to avoid having to issue a check for such a small amount of money.
The Survey Says…
The NASPP does have data on what companies are doing with respect to par value. According to our 2010 Domestic Stock Plan Design survey, 93% of responding companies do have a par value associated with their common stock. Of those companies, when it comes to restricted stock, 43% issue only treasury shares (which are not subject to par value requirements), 36% utilize past services as payment, 12% use future services as payment, and only 6% collect cash (the remaining 3% replied “other”.)
As you can see, there are lots of considerations for such a seemingly small piece of the restricted stock pie. This topic and more advanced issues will be covered in the Advanced Issues for Restricted Stock Pre-Conference session, and it’s not too late to register!
In the category of “really, doesn’t the IRS have anything better to do,” the IRS has proposed revisions to existing regulations under Section 83 of the Internal Revenue Code. The proposed changes are designed to clarify when a substantial risk of forfeiture exists with respect to shares that are subject to restrictions on transferability.
Was Anyone Confused About This?
Specifically, the regulations clarify that a substantial risk of forfeiture is established only with a service condition or a condition related to the purposes of the transfer. I have no idea what this means or why the IRS thinks it needs to be clarified. The extent of this change was to add the word “only” to the sentence:
A substantial risk of forfeiture exists [only] where rights in property that are transferred are conditioned, directly or indirectly, upon the future performance (or refraining from performance) of substantial services by any person, or upon the occurrence of a condition related to a purpose of the transfer if the possibility of forfeiture is substantial.
Gosh, that is so much clearer now.
More Changes That Don’t Really Change Anything
The proposed changes are also designed to clarify that the likelihood of forfeiture must be considered when assessing whether a substantial risk of forfeiture exists. The preamble to the proposed regulations cites an example involving shares that are non-transferable and subject to forfeiture if specified performance conditions are not achieved. In the example, it is highly probable that the conditions will be achieved. As a result, the award is not considered to be subject to a substantial risk of forfeiture.
Finally, the proposed changes clarify that transfer restrictions in and of themselves don’t create a risk of forfeiture even if violation of the restriction carries the potential for disgorgement or forfeiture of the stock. The only exception is for stock that must be held to avoid triggering short-swing profits recovery under Section 16(b) (and this is only an exception because it is baked into the tax code). This clarification codifies a prior IRS Rev. Rul. (see the NASPP alert “Section 83 Treatment of Sale Restrictions Imposed for Securities Law Purposes“).
The last two clarifications seem to be intended to mitigate the results of a First Circuit Court decision. The case involved an employee who was required to sell stock he acquired upon exercise of an option back to the company at cost if he sold the stock within one year of his exercise. The court ruled that this requirement delayed taxation under Section 83, even though the likelihood that the employee would try to sell the stock during this one-year period was very small. See the Akin Gump memo included with our alert for a great summary of the case and its relevance to the IRS proposal.
And while these changes seem a little more substantive, given the fact that we’ve had a Rev. Rul. on this matter since 2005, I’m not sure this changes how any practitioners interpret Section 83.
Taxation of Clawbacks?
I wonder if the IRS is targeting clawback provisions here. With all the recent hubbub over clawbacks (for example, see last week’s guest blog entry by Mike Melbinger) and the fact that regulations for mandated clawbacks under Dodd-Frank are expected from the SEC this year, I think the IRS might be trying to get out ahead of any ideas anyone might have that clawback provisions somehow delay taxation under Section 83.
More at the NASPP Conference
I’m sure rule change will be discussed during the session “The IRS and Treasury Speak” at the 20th Annual NASPP Conference. It will be interesting to hear what the IRS and Treasury staffers have to say about it.
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 we keep an ongoing “to do” list for you here in our blog.
Don’t miss your local NASPP chapter meetings in Chicago, San Francisco, and Wisconsin. I will be at the San Francisco chapter meeting–I hope to see you there.
I recently attended a San Francisco NASPP chapter meeting that featured a presentation by Yana Plotkin of Towers Watson on trends in equity compensation. Yana included some data from the Towers Watson “2010/2011 Report on Long-Term Incentives, Policies and Practices.” Here are a few highlights:
Portfolio Approach
More companies are granting at least two types of awards–73% of respondents indicated this practice, an increase of 10% from 2009. Larger companies are more likely to utilize three types of awards than smaller companies.
Pay for Performance
Towers Watson is seeing a strong trend towards performance awards, which are now the second most common type of long-term incentive offered by survey respondents, ahead of stock options. Full value shares (RS/RSUs) were the most common type of LTI offered. In the NASPP’s 2010 Stock Plan Design and Administration Survey (co-sponsored by Deloitte), we also saw a strong trend towards performance awards, although we did not see them outpace the usage of stock options.
Full Value Awards
Towers Watson reports that full value awards have outpaced stock options for grants to employees at the manager/individual contributor level. In the NASPP survey, we also saw an increase in full value awards and even performance awards to employees at these levels, but many respondents were still granting stock options.
Award Sizes
For employees earning under $200,000, award sizes (as a percentage of salary) remained flat from 2009 to 2010 in the Towers Watson survey. But for employees at higher salary levels, award sizes increased, although not quite to 2008 levels.
Award Design
In terms of performance award design, Yana mentioned that they are seeing interest in awards with shorter performance periods, e.g., two years, and some sort of trailing service requirement after the performance goals have been met. I am a proponent of this design; for executives, it helps facilitate compliance with ownership requirements and clawback provisions and, for everyone, it can simplify tax withholding procedures.
Interestingly, Towers Watson reports that 35% of respondents to their survey measure performance relative to peers or a market index. For the NASPP survey, this was about the same (41% of respondents). Both surveys also agree on how commonly TSR is used as a performance metric (25% of respondents in the Towers Watson survey, 29% of respondents in the NASPP Survey). Yana indicated that Towers Watson is seeing more companies use TSR than in the past and that certainly aligns with the buzz I am hearing from compensation consultants, etc.
Performance Awards Are the Future
The biggest takeaway I got from Yana’s presentation is that the Say-on-Pay, the disclosures required under the Dodd-Frank Act, and shareholder expectations are making performance awards the hottest thing going today in terms of equity compensation. If you aren’t fully up to speed on them, don’t miss the pre-conference session, “Practical Guide to Performance-Based Awards,” to be held on November 1 in San Francisco, in advance of the NASPP Conference. Register by May 13 for the early-bird discount!
Online Fundamentals Starts in Two Weeks–Don’t Miss It! The NASPP’s acclaimed online program, “Stock Plan Fundamentals,” begins on April 14. This multi-webcast course covers the regulatory framework and administrative best practices that apply to stock compensation; it’s a great program for anyone new to the industry or anyone preparing for the CEP exam. Register today.
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.
Register for 19th Annual NASPP Conference (November 1-4 in San Francisco). Don’t wait; the early-bird rate is only available until May 13.
Today we have a fabulous installment in our Ask the Experts series of webcasts, “Tax Reporting for Stock Compensation.” I thought I’d shake things up and take a look at tax filing from the employee’s perspective.
Income and capital gains associated with equity compensation can be pretty daunting for the average employee. These are my top five reporting mistakes. Your personal top five may differ based on your company’s equity compensation program and the education you provide around taxation.
No Schedule D
Employees who do not understand capital gains at all could have this problem when it comes to reporting any sale. However, it’s much more common when there is a cashless exercise or sell-to-cover transaction, particularly if the company defines the FMV as the sale price. The employee may know that the income is reported and the associated taxes are withheld by the company, assume that the exercise (or vest) and the sale are the same transaction because they happened simultaneously and not even consider the need to report the sale. Alternatively, the employee may understand that the sale price and the FMV on the exercise or vest date is the same and assume that there is nothing to report.
Partial Sale Confusion
When an employee sells only some of the shares from an option exercise or restricted stock vest, it is surprisingly easy to misunderstand what should go on the Schedule D. This is more of a problem for employees doing a sell-to-cover transaction, but can happen even if the sale is from held shares. When referencing the exercise or vest statement, the employee reports all exercised/vested shares as being sold and/or reports the cost basis for the total shares acquired as the cost basis for the shares that were sold. The most likely result is a calculation on the Schedule D that shows a sizable capital loss on the sale. Hopefully, cost basis reporting will eventually help prevent this error.
ESPP – Qualifying Disposition
Qualifying dispositions of ESPP shares are confusing because there is still (in most cases) an income element if there was a discount at purchase. Unfortunately, the most common mistake for employees is not reporting that ordinary income when or if the company fails to do so. The income element of a qualifying disposition is the lesser of the discount as if the purchase took place at the beginning of the offering period (which should now be reported to employees on Form 3922) or the spread between the purchase and sale prices. Failure by the company to report that income doesn’t exempt the employee from reporting it.
The exception is that when the sale price is lower than the purchase price, there is no ordinary income on the qualifying disposition–and that means that employees in this unhappy situation are actually more likely to report it correctly.
Reporting Gain Twice
The most common reason for this error is a misunderstanding of restricted stock vests. The employee reports $0 as the cost basis, effectively reporting the spread at vest twice: once as income and once as capital gains. This can happen with options as well if the employee uses the exercise price as the cost basis for the shares when reporting the sale. Double reporting may also happen if an employee doesn’t realize that the income resulting from a disqualifying disposition of ISO or ESPP shares is already included in the Form W-2 (assuming your company is aware of the disposition and reports it correctly).
Failure to Report an ISO Cash Exercise
Employees with ISO grants have a host of tax concepts to familiarize themselves with, but none is quite as mysterious as the issue of AMT. AMT is such a nebulous issue for most people that it is often given only a brief explanation in equity compensation communications.
Many employees hear the words “no income” and assume that is synonymous with “no reporting obligation.” However, any exercise of ISOs (assuming the shares are held at least through the remainder of the tax year) means that the employee must complete and attach Form 6251 to their tax return, even if she or he is not subject to AMT. If the employee is subject to AMT and fails to report the exercise, this is (of course) potentially a much bigger issue than if the employee simply fails to prove she or he is not subject to AMT.
So, what’s the top five for your company? If you don’t know, start thinking about it now.
Here’s a better question: How do you figure out what mistakes your employees are making? First, anything that you don’t personally understand 100% is bound to be even more difficult for employees. Also, anything comes to you as a question is a potential for a reporting problem. Keep your ears open for horror stories–if it’s happened to one person, it could happen to your employees. Finally, if you’re really ambitious, you could survey a sample of your employees with example scenarios to see if they know how to report different transactions.
Restricted stock units and awards carry a unique risk when it comes to grant acceptance. It’s easiest to understand this risk in contrast to stock options. In most countries and situations, the taxable event on a stock option is the exercise. Employees must personally take action in order to exercise a stock option, which gives companies the opportunity to have their undivided attention when it comes to grant acceptance and simply prevent exercise until the grant has been signed. Restricted stock awards and units, on the other hand, are taxed on either the vest date or even at grant (depending on the country and circumstances). For the purpose of simplification, I’m going to focus on RSUs granted in the U.S. that do not have accelerated or continued vesting after retirement.
Policy #1: Time’s Up!
Some companies take a conservative approach to this issue by actually enforcing a grant acceptance requirement with a policy under which employees forfeit their grants if acceptance isn’t completed within a specific timeframe. In this approach, the highest risk is in ensuring adequate communication regarding the timeframe and consequences of not accepting the grants. In addition to including a warning in all communications leading up to the grant, it’s a good idea to also send out reminders to employees as they approach the deadline for acceptance.
Policy #2: It’s Yours Whether You Know it or Not
Some companies default to the philosophy that grants will continue to vest regardless of the grant acceptance status, even if they have a policy that theoretically requires grant acceptance without actually enforcing it. Hopefully, this is a well thought-out policy and not just a head-in-the-sand reaction to the issue of grant acceptance. For example, it could be that the comany’s legal team concluded that allowing shares to vest before the terms and conditions have been accepted poses less risk to the company than cancelling unaccepted grants. Regardless of the reason behind adopting this policy, the best way to make it effective is to make sure that grant documents, communications, and company policy accommodate how tax withholding is executed. The smart approach is to have a default tax withholding method which does not require action by the employee such as share withholding. Another advantage of share withholding over other methods is that, in the event the employee ultimately wants to decline the grant, the odds of being able to “unravel” the vest are much higher.
Policy #3: What?!
The riskiest approach of all is to ignore the issue until it’s too late. Of course, it’s entirely tongue-in-cheek to call this a policy at all. A company might fall into this situation because of poor planning, inadequate documentation, or a sudden increase in the number of RSU recipients. This could lead to a situation where taxes are due, but the company has no way to collect them because there either isn’t a default tax withholding method, or the default isn’t possible without action from the employee. Companies that find themselves in this position must scramble to get grant acceptance and/or collect taxes, possibly delaying the tax remittance or actual delivery of shares. Because it’s likely not possible to consider a late delivery of shares as a delay in constructive receipt of the shares in, delayed tax remittance could result in penalties incurred by the company.
Since it’s a holiday week, I thought I’d do something a little lighter with the blog. Today I’m featuring a poem by John Hammond of Computershare (and poet laureate of the NASPP blog).
There won’t be a blog on Thursday, since it’s Thanksgiving and I hope you all will be spending time with your friends and families, giving thanks, doing whatever you do to celebrate national holidays, and not reading blogs about stock compensation.
Anapestic Ballad for 83(b) By John Hammond
“We don’t allow the use of 83(b)” You don’t? No, we don’t But how can that be? It’s tax code my friend, it’s a natural thing It’s the essence of harmony – it’s the I Ching Messing with tax? It’s like building a dam to steal all the water – then flooding your land The consequences are never as you intended Just wait ’til it’s the CEO you’ve offended And what would you do if a person – just one You the tax police now with your little tax gun? And he blinked his eyes slowly with a slight roll toward the back To begin his retort of my little attack It’s all in our plan… it’s as we intended To change it would require it to be amended… I certainly won’t argue what’s in your plans Your plans are your plans and that’s just how it stands But I am curious to know all the whys and the whats More than one plan design has been done by a yutz We don’t believe in them You don’t believe? It ain’t Santa Claus and this ain’t Christmas Eve The 83(b) has been a wonderful code For those who have used it – sure, you have to be bold My favorite use was with AMT When companies use to grant ISOs… before one twenty three It took an early exercise on repurchaseable shares And the AMT gods had to sit back and stare and say “Well done!” Well Done!? Perfect, I say! I have accelerated nothing, so nothing I’ll pay There has to be more…more than “I don’t believe” To abolish the code of 83(b) Our vendor can’t handle the process today We would track offline ’til systems were changed It’s not worth the risk or the mess or the fuss To handle the manual process of this stuff Have you considered RSUs an alternative way Versus saying you don’t and walking away With an RSU you could say, “we would, but cannot There is no transfer ‘cos property it’s not” It may just be diction… but diction’s a lot We’ll consider your advice when we make our next plan But it won’t change the past and it won’t change those grants Which at our burn rate, will be 2010 And I left my friend and I went on my way And thought of the thoughts we had thought of that day And I didn’t like it as friend or as foe Or as tax code groupie – I’m weird… yeah, I know In his shoes, I would have hoped I’d stood strong ‘Cos messin’ with tax code is really just wrong.
If you weren’t able to attend the NASPP Conference–or if you attended but weren’t able to get to all the sessions you were interested in–the recorded Conference audio is now available. You can purchase just the session(s) you are interested in, save by purchasing a five-session package, or save even more by purchasing the audio for the entire Conference. Purchase the audio today!
Conference attendees can access the full Conference materials, including any last-minute updates, as well as the audio for the 6th Annual Executive Compensation Conference at the NASPP Conference Materials Website.
NASPP Quick Survey on Tax Reporting and Collection Procedures
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.
Register to attend local chapter meetings next Tuesday, Dec 1: Boston is hosting a meeting and the LA and San Fernando Valley chapters are hosting a joint meeting. Robyn Shutak, Education Director for the NASPP, will be presenting at the LA/San Fernando Valley meeting; be sure to stop by and say hello!