The NASPP Blog

Monthly Archives: July 2013

July 30, 2013

On Your Radar

For today’s “Meet the Speaker” interview, we feature an interview with Ellen Sueda of Seyfarth Shaw, who will lead the session “Keeping Up: Ten Issues You Should Have On Your Radar” at the 21st Annual NASPP Conference. Here is what Ellen had to say:

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.

About the NASPP Conference
The 21st Annual NASPP Conference will be held from September 23-26 in Washington, DC. This year’s program features 60+ sessions on today’s most timely topics in stock compensation; check out the full agenda and register today! You don’t want to miss Ellen’s session, “Keeping Up: Ten Issues You Should Have On Your Radar.”

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July 29, 2013

NASPP Chapter Meetings

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

Western PA: Doug Ellis of K&L Gates and Steve Kline of Towers Watson provide a debrief of this year’s proxy season and an update on Rule 10b5-1 plans. (Tuesday, July 30, 8:00 AM)

KS/MO: The chapter presents a hot topics roundtable (Wednesday, July 31, lunch)

Wisconsin: Michael Falk of Winston & Strawn presents on the latest Section 409A developments. (Wednesday, July 31, 11:45 AM)

DC/VA/MD: Sinead Kelly and June Anne Burke of Baker & McKenzie present “International Updates and Grant Acceptances for Equity Plans.” (Friday, August 2, 11:30 AM)


July 25, 2013

A Marriage Made in Heaven

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.


  1. My first name means “River Bank” in French. 
  2. I just learned how to surf in Mexico. 
  3. My first language was Lithuanian.

About the NASPP Conference
The 21st Annual NASPP Conference will be held from September 23-26 in Washington, DC. This year’s program features 60+ sessions on today’s most timely topics in stock compensation; check out the full agenda and register today! You don’t want to miss Rive’s session, “Equity & Employment Tax: A Marriage Made in Heaven.”

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July 24, 2013

NASPP To Do List

NASPP To Do List
Here’s your NASPP “to do” list for this week.

– Barbara


July 23, 2013

Can You Rely on Informal NYSE Opinions?

When public companies are contemplating changes to their stock compensation programs, it is not uncommon to ask the NYSE (or Nasdaq, depending on where their stock is trading) for an informal opinion as to whether the changes require shareholder approval. Today I blog about a recent Delaware court ruling that calls the authority of these informal opinions into question. 

Here is the sequence of events:

  1. A company wants to grant a large ($120 million) “performance award” to its CEO that will vest only upon continued service; the stated purpose of the award is retention.  The company’s stock plan doesn’t allow grants of performance awards that vest merely on continued service, so this requires a plan amendment.
  2. The company asks the NYSE if the plan amendment requires shareholder approval and an NYSE staffer tells the company that the amendment doesn’t require shareholder approval.
  3. The company proceeds with the amendment and issues the grant.
  4. The grant quickly garners a lot of negative attention from the media.
  5. A shareholder (a large pension fund) sues the company’s board and CEO, alleging that the plan amendment was illegal.  The gist of the argument is that shareholder approval of the amendment is required under the NYSE listing standards and that, because the plan has a provision in it requiring shareholder approval of amendments when such approval is required by the exchange on which the company’s stock is traded, the amendment isn’t legal under the terms of the plan.

The lawsuit has along ways to go before we get an actual decision, but the Delaware Chancery Court has allowed the lawsuit to proceed, despite the fact that the company has an informal opinion in writing (an email) from an NYSE staffer stating that the amendment did not require shareholder approval.

My synopsis here is based on the very excellent Sullivan & Cromwell memo summarizing the case that is posted on  In addition to the highlights I’ve covered here, the memo includes a great discussion of some of the key factors the judge considered in issuing the ruling. If you are going to be seeking informal guidance from the NYSE or Nasdaq, you should definitely check it out–you might pick up a couple of pointers to make the opinion you receive a little more reliable.

I Have a Couple Questions

This saga raises a couple of questions for me (and since the company involved does not appear to have any NASPP members, I feel unfettered in my contemplation of them).

First, why didn’t the company just amend the plan to allow for the grant of RSUs, rather than the seemingly much more convoluted and backwards amendment to allow the grant of performance awards that don’t vest based on performance.  Honestly, in today’s “pay-for-performance” world, that just seems like asking for trouble.  The plan already allows the grant of restricted stock that vests based purely on service and question C-3 of the NYSE’s FAQs on the shareholder approval requirements specifically states that where a plan already allows the grant of restricted stock, an amendment to allow the grant of RSUs is not material.  Seems like not only might this have avoided the lawsuit (or at least the ruling allowing the lawsuit to proceed) but the company also wouldn’t have had to bother with the informal opinion from the NYSE.  I’m sure there must be good reason, but I’m completely baffled as to why the company didn’t approach the amendment this way.

Second, how much do you have to pay your CEO to get him to stay?  $120 million seems like a lot, just to get the guy to stick around.  And, in this case, the CEO’s last name happens to also be the name of the company, which isn’t a coincidence–he’s the son and nephew of the co-founders of the company. And it takes $120 million to get him to stick around?  That just seems wrong.

Some Barbara Trivia

One interesting piece of trivia is that the company involved is a large real estate investment trust that happens to own the shopping mall that was my sister’s and my favorite when we were growing up. We spent a lot of time at that mall. (What? We lived in the suburbs and that’s what suburban kids did back then–they went to the mall).

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July 22, 2013

NASPP Chapter Meetings

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

DC/VA/MD: In this 1/2 day meeting, Christine Cognetti of Morgan Stanley presents “10b5-1 Plans in Today’s Environment” and Jen Baehr and Jenn Namazi of the NASPP present “Hot Topics in Equity Compensation.” Be sure to say “hi” to Jen and Jenn if you attend the meeting. (Monday, July 22, 8:30 AM)

Austin: Marianne Snook with Stock & Option Solutions presents “Stock Talk: How to Communicate with Your Employees.” (Tuesday, July 23, 11:30 AM)

Philadelphia: Jen Baehr and Jenn Namazi take their show on the road to present “Hot Topics in Equity Compensation” to the Philly chapter. Be sure to say “hi” to the Jen(n)s is you attend. (Tuesday, July 23, 8:30 AM)

Twin Cities: It’s a big week for half-day events, with the Twin Cities chapter also hosting one. The meeting features a keynote by Dan Walter of Performensation on preparing for, defending and promoting your compensation programs through the upcoming reporting season. A variety of breakout session are also being offered. (Thursday, July 25, 7:30 AM)


July 18, 2013

The Supreme Court and Stock Compensation

Ding, ding, ding. That’s the sound of my inbox waking up to a flurry of alerts and articles about a recent Supreme Court decision that, turns out, affects stock compensation – sort of. On June 26, 2013, the high court ruled in the case of United States v. Windsor that Section 3 of the Defense of Marriage Act (DOFA) is unconstitutional. Section 3 of the DOFA was an attempt at uniformly defining marriage at the federal level, and that definition excluded same-sex marriages. The recent court ruling means that the definition of marriage is now back in the hands of the states, and there are currently 13 states and the District of Columbia that have enacted laws recognizing same-sex marriages. In jurisdictions where same-sex marriages are lawful, those in same-sex marriages are now considered to by married for purposes of any federal regulations or statutes that refer to one’s marital status.

How Does the Ruling Affect Stock Compensation?

The defeat of Section 3 of the DOFA means that we now must look at the various state statutes to determine the definition of “marriage” or “spouse” for purposes of employee benefits. Essentially, benefits subject to federal laws (ERISA, COBRA, Internal Revenue Code, etc.) fall under these provisions. According to a blog post on the subject, “While stock plans and nonqualified benefit plans are not affected by federal laws in the same way as qualified retirement plans (e.g. a 401(k) plan) or health and welfare plans, the changes that will be required in these other benefit plans will probably lead to similar modifications in stock plan documents.” Although there was nothing in the Supreme Court ruling that directly addressed stock compensation, it seems that when it comes to things like policies on divorce for purposes of stock options, or transferable options, death, and other situations where a “spouse” may be involved, it’s likely many companies would opt to align with practices in place for other benefit plans that are covered under the ruling. Therefore, even though stock compensation is not specifically covered under the ruling, it is indirectly affected. The possible areas that may need a review off the top of my head are:

  • Beneficiary designations
  • Plan Documents and Grant Agreements
  • Policies or communications on divorce and transferable options

The holding takes effect on July 21, 2013, so employers are working to immediately assess those plans affected. In addition, stock plan provisions and policies should be reviewed to align with changes being made to other covered plans (e.g. 401(k)). For example, if your stock plan mandates a default beneficiary of a “spouse” for stock options upon death, the term “spouse” may need to be redefined to include same-sex spouses where lawful. In addition, it’s likely that Human Resources and Legal are already working away to navigate this situation, so you may want to plug in now – things like employee communications and matters of policy going forward could be streamlined and should be addressed.

I’m still confused about some aspects of this – like is whether we need to look at the state where the marriage took place, or the state where the employee currently resides for purposes of applying state laws to the definition of marriage for employee benefit purposes. I guess that’s for the lawyers to figure out. Based on the number of alerts I got on this subject, they are already on that task. In a client alert, Paul Hastings gives a good description of the issues around determining applicable state laws and this entire situation in general.

The action item here is to talk to counsel and start reviewing your equity plan documents, policies and communications to determine where changes should be made. It seems logical that, just as we’ve migrated towards aligning with other benefit practices (401(k), etc.) in the past, it would make sense to similarly consider adjustments to stock plan matters in tandem with changes to required benefit plans. Just when it seemed summer was starting to fall into a rhythm of lazy, hot days (is there such a thing as a lazy day?), there’s never a dull moment.


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July 17, 2013

NASPP To Do List

NASPP To Do List
Here’s your NASPP “to do” list for this week.

– Barbara


July 16, 2013

Equity Values of a Different Flavor

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.

About the NASPP Conference
The 21st Annual NASPP Conference will be held from September 23-26 in Washington, DC. This year’s program features 60+ sessions on today’s most timely topics in stock compensation; check out the full agenda and register today! You don’t want to miss Jon’s session, “Equity Values of a Different Flavor.”

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July 15, 2013

NASPP Chapter Meetings

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

Los Angeles: Brad Reynolds of ISP Advisors, Frances Johnston of Royse Law Firm, Marianne Brannock-Hill of FRS Equity Strategies, and Andrea Kagan of KPMG present “Corporate Governance – Keep the Striped Suit at Bay.” (Wednesday, July 17, 1:00 PM)

Ohio: The chapter hosts a half-day meeting featuring two presentations: “Still Crazy After All These Years: Taking the Insanity Out of Mobile Employee Administration” and “Who let the watchdogs out?” (Wednesday, July 17, 10:00 AM)

Boston and Connecticut: The chapters host their 5th annual regional all-day conference, featuring presentations on Section 162(m), the 2013 proxy season, global awards, spin-offs, FICA taxation, and personal career growth. This is a great event; if you are in the area, you should definitely attend. Check out the pics from last year’s program. (Friday, July 19, 8:00 AM)

NY/NJ: Eric Hosken and Kelly Malafis of Partner with Compensation Advisory Partners present “To Request New Shares or Not Request New Shares: The Equity Plan Proposal Decision.” (Friday, July 19, 8:30 AM)