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Proposed Rule Would Make No-Fault Clawbacks Mandatory for Public Companies

Guy GrabbingLast week the Securities and Exchange Commission (SEC) proposed a new Rule 10D-1 that would direct national securities exchanges and associations to establish listing standards requiring companies to adopt, enforce and disclose policies to clawback excess incentive-based compensation from executive officers.

  • Covered Securities Issuers. With limited exceptions for issuers of certain securities and unit investment trusts (UITs), the Proposed Rule 10D-1 would apply to all listed companies, including emerging growth companies, smaller reporting companies, foreign private issuers and controlled companies. Registered management investment companies would be subject to the requirements of the Proposed Rule only to the extent they had awarded incentive-based compensation to executive officers in any of the last three fiscal years.
  • Covered Officers.   The Proposed Rule would apply to current and former Section 16 officers, which

Discretionary Clawback Policies: Risk of Variable Stock Plan Accounting

ChartCompanies should be aware that at least some major accounting firms are questioning whether discretionary aspects of clawback policies trigger variable accounting for compensatory equity awards granted by those companies. Existing accounting guidance (ASC 718-10-30-24) would seem to suggest that clawback features should not disrupt fixed accounting treatment because of their contingent nature.

Now, however, PricewaterhouseCoopers and KPGM, at least, are publicly expressing concerns about clawback policies focusing on their discretionary, rather than contingent, nature. A 2013 PricewaterhouseCoopers survey of 100 companies indicated that nearly 80% of those companies had clawback policies that had problematic discretionary provisions. A clawback policy could involve discretion as to what circumstances it may apply; whether it should be applied; and, if applied, how severely it should be applied. It seems that all aspects of discretion may be problematic. Companies

83(b) Elections

83(b) Elections

September 5, 2014

Authored by: Chris Rylands

Our sister blog, Start-Up Bryan Cave, recently posted about when and why to use the an 83(b) election.  The post has a good discussion of the advantages and disadvantages.

One item it does not mention is the company’s deduction, which is taken if and when the 83(b) election is made.  In the absence of an election, the deduction occurs when the property vests.

Of course, for the company to take the deduction, it has to know that the election has been made.  Even though the IRS rules require the recipient to give a copy to the company, another valuable planning point is to make sure that the agreement itself also requires the recipient to provide a copy of the election to the company.

Upcoming Equity Plan Proposal? ISS Invites U.S. Companies to Verify Equity Plan Data

Institutional Shareholder Services, or ISS, invites U.S. companies to verify the data it uses to evaluate proxy statement equity plan proposals.  ISS previously announced a move to a “balanced scorecard” approach for its evaluation of equity plan proposals.  Data verification is included as a key feature of this approach.

Data verification allows companies to preview, and if necessary update, the data used by ISS in its vote recommendation.  Some companies have been frustrated when reviewing ISS vote recommendations that include inaccurate or misconstrued data.  This program is designed to improve the quality of information used by ISS.  See “FAQs:  Equity Plan Data Verification” for details about the program.  Below is a summary of some key features:

How to Participate

  • The data verification program is optional.
  • It is open to U.S. companies who have filed definitive proxy materials after September 8th, 2014 with an equity plan proposal (new

Five Key Considerations When Drafting a Release

Five Key Considerations When Drafting a Release

July 2, 2014

Authored by: Bill Wortel and benefitsbclp

Employment Termination and ReleaseSeparation agreements almost always contain release provisions whereby one or both parties agree to waive claims that they may have against the other party; when the employee releases claims, he or she typically gains compensation or a benefit that he or she is not already entitled to receive.  In a world in which every terminated employee is a potential plaintiff, employers should have a good grasp on how to draft a valid and enforceable release in a separation agreement.  Here are five tips every employer should consider when drafting this type of a release.

Tip No. 1:  Offer Valid Consideration

In order to have a valid and enforceable release agreement, the employer must provide the employee with payments or benefits the employee is otherwise not entitled to receive.  Therefore,

409A Day Comes a Day Early This Year

As we have noted previously, March 15 is tax “Code Section 409A Day.”  For employers with calendar fiscal years, that is generally the last day an amount can be paid and still qualify as a short-term deferral that is exempt from 409A’s stringent timing and form of payment requirements.  But what does one do when March 15 falls on a weekend, as it does this year?  You likely aren’t cutting payroll checks on a Saturday.  Can you wait until Monday to pay?

The answer is no.  The rules are clear that the payment generally has to be made by the 15th day of the 3rd month (hence, March 15) of the year following the year in which either the right to the compensation arises or the compensation is no longer subject to a substantial risk of forfeiture (and note that for this purpose, the 409A definition

Don’t Miss the April 15th Deadline to File a Protective Refund Claim for 2010 FICA Tax!

As you may recall from our earlier post, the 6th Circuit held in U.S. v. Quality Stores, that severance payments made to employees in connection with an involuntary reduction in force were not “wages” subject to FICA taxes. This decision was contrary to published IRS guidance and created a split in the courts. In October of last year, the United States Supreme Court agreed to review the case and on January 14th, it heard oral arguments. The Supreme Court is expected to issue a ruling by the end of June.

Taxpayers may be entitled to a FICA tax refund if the decision is upheld by the Supreme Court on appeal. In order to preserve the right to a refund, taxpayers must file a protective claim before the applicable statute of limitations runs. As we previously reported in a post last year, the deadline to

Tips and Traps for Taking Current Year Deductions for Bonus Programs Fixed by End of Year

December 20, 2013

Categories

As the tax year end approaches, careful planning for year-end bonus accruals presents an opportunity to accelerate your deduction – don’t accidentally cause deferral. Recent guidance from the Internal Revenue Service provides a roadmap to the latest thinking when claiming deductions for bonus pool accruals. The key take away from Field Attorney Advice Memorandum LAFA 20134301F: scrub compensation committee resolutions approving bonus amounts to remove any possible post-year end discretion to reduce the full bonus pool amount.

This client alert (drafted by Bryan Cave lawyers Chris Welsch, Dan White, and Sarah Sise) discusses the guidance.

Before the Ball Drops for the New Year, Don’t Forget to Address These 2013 Employee Benefit Items!

Qualified Plans

  • If your plans are filed in “Cycle C” for determinations letters (i.e., plan sponsor’s EIN ends in 3 or 8), address items needed for the IRS filing before the end of the year. The filing deadline is January 31, 2014, but notices to “interested parties” must be distributed no later than 10 days before the filing. Set that filing date and prepare the plan restatement before the ball drops.
  • If your company did not timely adopt a written 403(b) plan document, you may qualify for a reduced compliance fee under the IRS’ correction program, but only if the filing is made before the ball drops.
  • Most defined benefit plans have been amended to incorporate the benefit accrual and distribution restrictions that apply if the plan’s funding drops below certain thresholds. These Code Section 436 rules must be added to your defined benefit plan by written amendment before

Looking Ahead – ISS 2014 Draft Policies and Proxy Survey Results

Looking Ahead – ISS 2014 Draft Policies and Proxy Survey Results

October 24, 2013

Authored by: benefitsbclp

Looking Ahead – ISS 2014 Draft Policies and Proxy Survey Results

Institutional Shareholder Services (ISS) conducts an annual survey to obtain input on corporate governance issues.  The survey results are considered by ISS in preparing annual updates to its proxy voting policies.  The survey often provides insight into potential ISS policy changes for the upcoming proxy season.

A few weeks ago, ISS released the results of its 2014 proxy voting survey.  ISS received more than 500 responses from institutional investors and corporate issuers located within and outside of the United States.   The 2013-2014 Policy Survey Summary of Results can be accessed here.  This week ISS posted draft 2014 policies for comment here.  The draft policies include proposed changes for U.S. companies to Board Response to Majority-Supported Shareholder Proposals and the ISS Pay for Performance Quantitative Screen.  The comment period will close on November 4, 2013

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