The NASPP Blog

September 22, 2016

Tax Reporting Requirements: 6039 and Beyond…

Our popular “Meet the Speaker” series, featuring interviews with speakers at the 24th Annual NASPP Conference, is 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 Keyoor Mankad of My Equity Comp, who will lead the session “Tax Reporting Requirements: 6039 and Beyond”.

Here is what Keyoor had to say:

NASPP: What is the most critical thing NASPP Conference attendees need to know about tax reporting?

Keyoor: 6039 reporting requirements and how to successfully manage them.The panel will review W-2 requirements for domestic and mobile international employees as well as provide tips, tricks and gotchas based on the panel’s wealth of expertise and experience.

NASPP: What are one best practice companies should implement?

Keyoor: A reporting calendar and a detailed procedural document are a must to maintain.

NASPP: What is the silver lining here?

Keyoor: Tax reporting requirements are not as cumbersome as perceived. Maintaining a good calendar and using the right resources will make things a lot easier and less time consuming.

NASPP: What is your favorite restaurant in Houston?

Keyoor: Pappas Bros. Steakhouse!!!

Don’t miss Keyoor’s session, “Tax Reporting Requirements: 6039 and Beyond,” at the NASPP Conference!

About the NASPP Conference

The 24th Annual NASPP Conference will be held from October 24-27 in Houston. This year’s program features close to 100 sessions on today’s most timely topics in stock and executive compensation; check out the full agenda and register today!

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September 20, 2016

Stock Purchase Sleuths: ESPP Insiders on Design

Our popular “Meet the Speaker” series, featuring interviews with speakers at the 24th Annual NASPP Conference, is 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 Tonya Epps of Stock & Option Solutions, Inc, who will lead the session “Stock Purchase Sleuths:  ESPP Insiders on Design

Here is what Tonya had to say:

NASPP: What is the most critical thing NASPP Conference attendees need to know about ESPPs?

Tonya: Plan design is so important for ESPPs. Through design of the plan, you can meet the company’s objective, relieve the administrative burden, and increase employee participation.

NASPP: What is one action should companies be taking now with respect to ESPPs?

Tonya: I’d encourage everyone with responsibility for an ESPP, or who may be considering an ESPP, to join me in a little sleuthing. Pull out your magnifying glass and really study how the plan is designed.  Some ESPP plan designs suffer from “off-the-shelf-it is,” and small tweaks can pay big dividends in reducing administrative burden. In our session, we will cover some  topics that I suspect many have never even considered, including fractional shares, transfer restrictions, purchase dates and different plans for different sources of income.

NASPP: What is the silver lining to ESPP sleuthing?

Tonya: The great news is that many small plan design or administrative improvements can be quickly and easily implemented in most cases. Once an ESPP has been approved by shareholders, there are very few changes that would require further shareholder approval. There is a huge opportunity to improve ESPP efficiency by implementing new processes, or, at most, taking a change to the board for approval.

NASPP: What is something people don’t know about you?

Tonya: Most people will think I am shy because I am not outspoken in a crowd.  So, I write spoken word poetry.  I am not wordy but I am able to rhyme about real life events.

If employee stock purchase is your profession
I’ll confess to you, it is my obsession
With a discount, look-back, and broad based
My ESPP enthusiasm is not misplaced

The company decides to the make the investment
The design of the plan is the perfect agreement
Meeting the company’s objectives
While increasing employees’ perspectives

ESPP … It is really a great opportunity
Despite this poem being so cheesy
Building relationship between the company & employee
With a goal to increase shareholders exponentially!

Don’t miss Tonya’s session, “Stock Purchase Sleuths:  ESPP Insiders on Design,” at the NASPP Conference!

About the NASPP Conference

The 24th Annual NASPP Conference will be held from October 24-27 in Houston. This year’s program features close to 100 sessions on today’s most timely topics in stock and executive compensation; check out the full agenda and register today!

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September 19, 2016

NASPP Chapter Meetings

Here’s what’s happening at your local NASPP chapter this week:

Chicago: Andrea Kagan of Solium presents “Discover Global Employment Law: The Overlooked Area of Regulatory Compliance.” (Tuesday, September 20, 7:30 a.m.)

DC/VA/MD and Philadelphia: It’s the 2nd Annual Joint DC/VA/MD & Philadelphia NASPP Chapter Half Day Event! Join the chapters for lunch and two amazing sessions! First, Barbara Klementz of Baker McKenzie will tackle “Global Equity Compliance 2.0” followed by “Hold. Flip. Split: Acrobatics of Employee Ownership” with Emily Cervino of Fidelity.” (Wednesday, September 21, 8:00 a.m.)

Denver: An informative and fun afternoon guaranteed for all! Come hang out at the one and only Molson Coors Tap Room after a panel discussion on Global Mobility and Taxation! (Thursday, September 22, 4:00 p.m.)

San Fernando Valley: Ryan Ross and Carly Sanfilipo of Aon Hewitt Company present “Pay Versus Performance: SEC Proposed Disclosure Rules.” (Thursday, September 22, 11:30 a.m.)

Twin Cities: It’s that time again! The Twin Cities annual social event is back! After Peter Kimball of ISS presents “Sweet Sixteen: The 2016 Proxy Season Review and the ISS Policy Update Process.” Join the chapter for refreshments and networking! (Thursday, September 22, 4:00 p.m.)

New York/New Jersey: The chapter presents “Enhancing the Performance Alignment through Long-term Incentive Design.” (Friday, September 23, 8:30 a.m.)

Phoenix: Lunch is on the Phoenix chapter as it hosts a mixer and member survey at the Paradise Bakery & Café. (Friday, September 23, 11:30 a.m.)

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September 15, 2016

The Struggle is Real! Corporate Action Communication Challenges

Our popular “Meet the Speaker” series, featuring interviews with speakers at the 24th Annual NASPP Conference, is 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 Aaron Schliem of Glyph Language Services, who will lead the session “The Struggle is Real! Corporate Action Communication Challenges

Here is what Aaron had to say:

NASPP: What will your panel cover at the NASPP Conference?

Aaron: Our panel will help guide you through what can be a rather tumultuous and emotional process—communicating about corporate actions. You will hear a real case study from Pinnacle Entertainment, with key insights from a global perspective. At the end of the presentation you will have a game plan for managing corporate action communications while strengthening your employee morale and buy-in to the larger corporate culture.

NASPP: What is a common mistake companies make and how can they avoid this?

Aaron: Companies commonly assume that their employees understand stock plan basics, when in fact they often do not. This lack of basic knowledge can be exacerbated by complex changes (like corporate action) and when companies communicate with employees across many markets. You can remedy this by allowing for sufficient time to communicate in layers of increasing complexity, by designing basic financial literacy training at the front end, and by employing best practices in terminology management (both in English and in all of your employees’ languages) to ensure consistency.

NASPP: What is the silver lining here?

Aaron: The silver lining is that in facing employee communications in what is often perceived as a negative context (corporate action) you can gain the trust of employees by carefully explaining implications (and offering sufficient information for employees to take smart action) and work to improve morale and cooperation by focusing on the positive impact of new changes both in terms of the company itself and long-term in terms of compensation potential.

NASPP: What is something people don’t know about you?

Aaron: Few people know that I am a man of the arts. I am a singer-songwriter, writing for voice with either guitar or piano. To feed my love of the theater I’ve recently joined the board of StageQ, Madison’s LGBT community theater company. We strive to increase visibility of queer people in the arts, creating new opportunities for community involvement with a special focus on creating safe and fulfilling opportunities for homeless queer youth.

Don’t miss Aaron’s session, “The Struggle is Real! Corporate Action Communication Challenges,” at the NASPP Conference!

About the NASPP Conference

The 24th Annual NASPP Conference will be held from October 24-27 in Houston. This year’s program features close to 100 sessions on today’s most timely topics in stock and executive compensation; check out the full agenda and register today!

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September 13, 2016

Mitigating Risk for Insiders with 10b5-1 Plans

Our popular “Meet the Speaker” series, featuring interviews with speakers at the 24th Annual NASPP Conference, is 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 Christine McCasland of Morgan Stanley, who will lead the session “Mitigating Risk for Insiders with 10b5-1 Plans

Here is what Christine had to say:

NASPP: What is the most critical thing NASPP Conference attendees need to know about Rule 10b5-1 plans?

Christine: When looking at 10b5-1 plans, the role of the company and the board is increasing. This includes the adoption of specific 10b5-1 policies. Our survey found that 98% of companies are involved in reviewing and approving their 10b5-1 plans to some degree.  Additionally, 67% of boards approved their companies insider trading policies, which often includes restrictions on the terms of the 10b5-1 plans.

NASPP: What is a common mistake companies make when it comes to Rule 10b5-1 plans and how can they avoid this?

Christine: A common mistake for a company is not developing an organized process, in particular not consolidating their insiders’ 10b5-1 plans. A brokerage firm can help a company achieve its objectives, manage its population, and simplify its process. Also it can help to retain one brokerage firm who has the capability of centralizing the transactions for all of a company’s insiders on one plan management platform.

NASPP: What is the silver lining to your session?

Christine: This survey gives us up-to-date benchmarking where we didn’t have benchmarking before.

NASPP: What is something people don’t know about you?

Christine: I’m not only from a large family of six boys and three girls, but one of my six brothers is also my twin!

Don’t miss Christine’s session, “Mitigating Risk for Insiders with 10b5-1 Plans,” at the NASPP Conference!

About the NASPP Conference

The 24th Annual NASPP Conference will be held from October 24-27 in Houston. This year’s program features close to 100 sessions on today’s most timely topics in stock and executive compensation; check out the full agenda and register today!

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September 12, 2016

NASPP Chapter Meetings

Here’s what’s happening at your local NASPP chapter this week:

Nashville: Thomas Swindle of UBS Financial Services along with Kerri L. McKenna and Teresa Yannacone of PwC present “FASB Simplification of Stock Compensation Accounting and Early Adopters Insights.” (Tuesday, September 13, 7:30 a.m.)

Ohio: Amit Tekwani and Nathan O’Connor of Equity Methods present “2016 State of the Union in Equity Compensation.” (Tuesday, September 13, 11:00 a.m.)

Las Vegas: Raul Fajardo of Certent and Ken Stoler of PwC present “Simple But Complex: ASC Topic 718 Updates (aka ASU 2016-09).” (Wednesday, September 14, 12:00 p.m.)

Michigan: Ron Rosenthal and Ian Dawson of Deloitte Consulting present “Executive Compensation—2016 Trends and Emerging Issues.” (Thursday, September 15, 8:30 a.m.)

Ohio: Barbara Klementz of Baker & McKenzie presents “Global Equity Compliance 2.0—Taking it to the Next Level.” (Thursday, September 15, 8:00 a.m.)

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September 8, 2016

NASPP To Do List

Two Days Left!
You have just two days left to take advantage of the early-bird pricing on the 24th Annual NASPP Conference. The Conference will be held from October 24-27 in Houston and the early-bird rate ends tomorrow, Friday, September 9. Register today!

Three Steps Towards a Fresh Start this Fall
Andrea Best of Stock & Option Solutions has posted a new NASPP Career Corner Blog on three steps to give your career a boost now that summer is over: take stock of your progress towards your goals, get organized, and take action.

NASPP To Do List
Here’s your NASPP To Do List for the week:

 

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September 7, 2016

Do Proxy Disclosures Encourage Cheating?

The question of the role of compensation in encouraging risk-taking and cheating on the part of executives is an ongoing debate (for example, see “CEOs with Stock Options Are More Likely to Break Laws,” by Dylan Minor, Harvard Business Review, May 26, 2106).  But a couple of recent studies that I heard about on a podcast make me wonder if it isn’t the amount or type of compensation that is the problem but more so the disclosure of it.

The Studies

I make dinner every night and doing so invariably involves endless chopping of vegetables. This gives me a LOT of time to listen to podcasts. One podcast I listen to regularly is NPR’s Hidden Brain, which discusses patterns in human behavior. A recent episode (“The Cheater’s High and Other Reasons We Cheat“) discussed social science research on cheating, specifically the social contexts in which people cheat.

The podcast discussed one study (“Cheating More for Less: Upward Social Comparisons Motivate the Poorly Compensated to Cheat” by Leslie John of Harvard Business School, George Loewenstein of Carnegie Mellon University, and Scott Rick of the University of Michigan) that found that people are more likely to cheat when they are aware that others are doing better than them. The subjects of the study were compensated at varying rates for performing a self-reported trivia task. The subjects were more likely to cheat when they knew that others in the experiment were earning more than them. The more easily they had access to the information about how others were compensated, the more likely they were to cheat. According to the authors of the study:

Our results suggest that low pay-rates are, in and of themselves, unlikely to promote dishonesty. Instead, it is the salience of upward social comparisons that encourages the poorly compensated to cheat.

A second study (“Winning a Competition Predicts Dishonest Behavior” by Amos Schurr of Ben-Gurion University of the Negev and Ilana Ritov of the Hebrew University of Jerusalem) found that people who won a competition were more likely to cheat on subsequent unrelated tasks. The propensity to cheat was tied directly to winning (i.e., performing better than their peers), not succeeding at personal goals or in games of chance.

Executive Compensation Disclosures and Cheating

When I listened to the podcast, I immediately thought of the executive compensation disclosures in the proxy statement. The disclosures provide an easy way for executives to compare their pay to their peers’. Not only is the information readily available on the SEC website, but it is fodder for any number of published studies on executive compensation. For proof, just look at the NASPP’s Surveys & Studies Portal. I count at least four or five such studies that are published annually, one of which is published in the Wall Street Journal.  And that’s just among the studies that I have permission to post on the website. I’m sure there are more that I’m not aware of. If you are among the top five highest executives, I’m pretty sure you have an idea of how your compensation compares to your peers’.

On top of that, in recent years executive pay has shifted more and more towards performance-based compensation, which enables executives to increase the amount they are paid by improving company performance. We’ve also seen a significant shift toward measuring performance based on relative TSR—that is, how well a company performs as compared to its peers.  Companies that rank higher against their peers “win” and those executives are paid more. Given the results of the two studies described above, this seems like a recipe for executives to cheat.

– Barbara

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September 1, 2016

Section 83(b) Elections Get Easier

IRS Amends Section 83(b) Election Procedures

In what is possibly the least controversial decision ever made by the IRS, the agency has adopted its proposed amendment to the procedures for filing Section 83(b) elections, eliminating the requirement that taxpayers file a copy of the election with their tax return for the year that they make the election.

It’s Nice that We Can All Agree on Something

The amendment, which was proposed last year (see “IRS Proposes Amendment to 83(b) Election,” received no comments at all. Zip. Zero. No one requested a public hearing and no hearings were held. Cue the sound of crickets (ok, technically that’s the sound of frogs—I don’t have a video of cricket sounds). Hence the amendment was adopted with no changes from the original proposal.

Background

In the context of stock compensation, Section 83(b) elections are most frequently filed when employees exercise stock options prior to vesting.  They are also sometimes filed upon grant of restricted stock. The election accelerates the taxable event for the award to the date of exercise (in the case of stock options) or grant (in the case of restricted stock). Employees wishing to file a Section 83(b) election must submit the election to their IRS service center within 30 days of the event triggering the election. Employees must also provide a copy of the election to their employer.  Prior to this proposed amendment, a copy of the election also had to be included with employees’ tax returns for the year.

Now that the IRS is encouraging taxpayers to file tax returns electronically, the requirement to include the election with tax returns has proved to be problematic, since few efiling systems can attach a scanned document to the return. There was also a concern that taxpayers might be able to revoke an election after the 30-day election period by simply failing to include it with their tax return.

Effective Date

The amendment is effective for transactions occurring on or after January 1, 2016 but the IRS permitted taxpayers to rely on it for Section 83(b) elections filed in 2015. For more information, see the NASPP Alert “IRS Finalizes Amendment to Section 83(b) Election.”

More Frogs and Tax Developments

I took that frog sound video when I was visiting the Hilton Americas – Houston where the 24th Annual NASPP Conference will be held. It’s at a pond in the park across the street from the hotel.  You know what else you can do in Houston besides hear the awesome sound of frogs at night?  You can get an update on this and other recent tax developments directly from IRS and Treasury staffers during the session “The IRS and Treasury Speak.”  Register by September 9 for the early-bird discount.

– Barbara

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