NASPP: Why is ongoing global compliance a hot topic right now?
Jon: Companies spend a great deal of time and money when they initially to offer their stock plans around the world. However, even when no new grants are made, there is an increasing amount of ongoing tax and regulatory compliance requirements that arise after the initial grant. Our panel of seasoned experts will discuss these ongoing compliance requirements, as well as the most efficient and cost-effective ways to comply with and to stay on top of the increasing number of compliance obligations around the world.
NASPP: What common mistake do companies make when issuing awards outside the United States?
Jon: They fail to sufficiently focus on the ongoing tax and regulatory obligations following the intial grants.
NASPP: What is the worst horror story you can tell relating to global compliance?
Jon: We worked with a very large multinational company some years ago that failed to report and withhold taxes on stock plan benefits for more than a decade in more than 20 countries. A considerable amount of time and money was spent to correct the situation.
NASPP: What is your favorite NASPP Conference memory?
Jon: Playing BlackJack with clients and friends at the 14th Annual NASPP Conference in Las Vegas.
The Financial Accounting Foundation, or FAF, has announced that they are going to conduct a post-implementation review of FAS 123(R). In today’s blog, I take a look at what this might mean for the future of stock plan accounting.
What the Heck?
The FAF oversees and provides funding for the FASB, as well as several other entities involved in promulgating US accounting standards. The FAF has recently begun conducting post-implementation reviews to evaluate the effectiveness of standards issued by the FASB (and also standards issued by GASB, Governmental Accounting Standards Board, which is the only other accounting standards board here in the United States–they aren’t just targeting the FASB).
You Can Take Your Aluminum Hat Off–They’re Probably Not Out to Get Us
Upon reading that the FAF is planning a post-implementation review of FAS 123(R), my first reaction was alarm. In the past, when various accounting authorities have reviewed US accounting standards on stock compensation, the outcomes haven’t been particularly favorable for those of us on team stock awards (notable examples include FIN 44, EITF 96-18, and, of course, FAS 123(R)). The FAF says (on its website) that standards are selected for a PIR based on “considerable amount of stakeholder input indicating that the standard might not be meeting its stated objectives.”
So I asked Bill Dunn at PwC about it and he put me in touch with his colleagues Ken Stoler and Pat Durbin (Pat is PwC’s national practice leader on standard setting). Ken and Pat don’t think the PIR signals any significant changes for stock plan accounting. They think that FAS 123(R) was selected for review merely because it is complex, pervasive, and has raised numerous practice issues–not because the FAF thinks there is anything wrong with the standard. They suspect that any changes that the FAF recommends will be minor and only in areas where divergence in practice has developed.
What Is a PIR?
According to the FAF website, the PIR has three main goals: to determine if the standard meets its stated objectives, to evaluate the standard’s implementation and compliance costs and benefits, and to provide feedback to improve the standard setting process. The PIR team uses a variety of procedures, including reviewing the project archives, reviewing academic and other research, and collecting stakeholder input via surveys and interviews. They then present their findings to the FASB’s chair and oversight committee.
As I understand it, the PIR team doesn’t recommend any specific standard-setting actions, they simply point out areas of concern and it is up to the FASB to decide whether or not to take action. Which means that this is a loonnnng process. First the FAF has to conclude the PIR, which takes a long time, and then the FASB has to act on their concerns, which takes even longer. But, the silver lining for me is that it sounds like there could be fodder for several blog entries along the way, especially if the FAF finds any areas of concern (which surely they will–it’s a big standard).
Why “FAS 123(R)”?
My other thought upon reading this was to wonder why the FAF calls the standard “FAS 123(R)” when the rest of us have to call it “ASC 718.” Because, frankly, it’s been a struggle to get used to the ASC 718 moniker. If the FAF can call it FAS 123(R), I thought maybe the rest of us could too. But, unfortunately, Ken doesn’t think we’ll all go back to calling it FAS 123(R) anytime soon.
Philadelphia: The chapter presents “State & Local Taxation of Stock Options & Other Equity Based Awards.” (Tuesday, August 27, 8:30 AM)
Ohio: A double session: Karen Larbalestrier and Cindy Elmore of Bank of America Merrill Lynch present “How to Promote Your Award Program Through Education” and Brian Wydajewski, Aimee Soodan, and Tulsi Patel of Baker & McKenzie present “2014 Equity Compensation Planning: Key Legal, Tax and Market Considerations in Preparing for 2014 Annual Equity Grants Around the World.” (Wednesday, August 28, 8:00 AM)
Silicon Valley: Marianne Friebel of Electronic Arts, Carrie Kovac of Symantec, and Neal Meredith of My Equity Comp present “119 Days ‘Til Christmas; 5 Days ‘Til Year-End Preparation Begins”. (Wednesday, August 28, 11:30 AM)
Houston: The chapter presents “Whoops! Avoiding Common Pitfalls in Equity Compensation Plans.” (Thursday, August 29, 12:00 PM)
Michigan: E*TRADE sponsors a presentation on performance awards, lunch, roundtable discussions and a Tiger’s baseball game. (Thursday, August 29, 11:15 AM)
San Francisco: Alison Wright of Baker & McKenzie presents “DOMA Decision’s Impact on Equity Compensation.” (Thursday, August 29, 11:30 AM)
I will be attending the Silicon Valley and San Francisco chapter meetings; I hope to see you there!
Who doesn’t love a celebrity sighting? For today’s “Meet the Speaker “interview, we take a detour from DC to Hollywood, to interview Emily Cervino of Fidelity, who will moderate the panel “Stock Compensation Goes Hollywood.” Here is what Emily had to say:
NASPP: What is the most important thing attendees should know about bringing a little Hollywood to their stock plan education program?
Emily: Education and communication continue to be a challenge for stock compensation. Our plans and technology have evolved, but too often our communication has not kept pace, with printed materials and static intranet sites. Validated by the wild success of viral videos and YouTube, videos are all the rage. You don’t need an all-star cast and legendary Hollywood director to make this medium an Oscar-worthy contender in your stock compensation toolkit. This session explores how video and other digital mediums can help connect and educate today’s stock plan participants. We will provide a comprehensive overview of your digital choices, including live video, custom-animation, computer-based training, voice-enriched video presentations, and others. We will provide a solid understanding of what works in the digital world, and what doesn’t, and cover from concept, to budget, to storyboards, to production.
NASPP: Why is this topic timely right now?
Emily: You don’t have to be a visionary to see that the way we consume information is changing. Printed materials, static intranet sites and long memos and articles are on the decline, while digital content, social media, mobile apps and virtual meetings are on the increase. With more than 40 million videos viewed on a monthly basis on YouTube, 56% of employers using social media for internal communications, and 93% of internal communications professionals seeing video as an important tool for sharing information with employees, it is clear that video is here to stay. Finding new and innovative ways to educate employees on equity and really engage with them is a challenge. Video is well suited to meet that challenge.
NASPP: What is the most innovative solution for companies that want to incorporate video into their educational program?
Emily: The great thing about this session is that it is bursting with innovative solutions. We will view eight different samples of equity compensation digital communications. From in-house to outsourced. From big-budget to no-budget. Live action, custom animation, computer based training…we have it covered. For companies looking for inspiration and innovation for stock plan education, this session is the place to be!
NASPP: What is your favorite NASPP Conference memory?
Emily: Many years ago…. long before I worked for Fidelity, I attended the Fidelity event at the Levi Strauss store in San Francisco. It was a great event, complete with a mechanical bull and a henna artist. But, the best thing was that I brought home a new pair of jeans with a fancy pocket embellishment. Two of my favorite things–shopping and stock compensation–rolled up together. I still have those jeans. Perhaps I’ll dig them out for DC!
The NASPP and Fidelity Investments are not affiliated. Fidelity Brokerage Services LLC, Member NYSE, SIPC. 658022.1.0 Fidelity Stock Plan Services LLC.
NASPP: What are a few key areas your panel will address?
Liz: Among other topics, we will address:
Tax deduction timing issues that arise in mergers and acquisitions
Tax treatment of earnouts
The impact of Section 409A
Differences between actual and phantom equity arrangements.
NASPP: What common mistake do companies make with stock compensation in M&A and how can they avoid it?
Liz: Companies often don’t think about the compensation deduction issues until after the transaction documents are finalized, and they may be blind-sided by the result of what they’ve agreed to. It is essential to address these issues before the transaction documents are finalized, when there is still flexibility to achieve the desired result.
NASPP: What is the silver lining to your topic?
Liz: Advance planning can avoid most pitfalls and any unanticipated results.
NASPP: What is your secret (or not-so-secret) superpower?
Liz: Without a doubt it’s the team I work with at Ernst & Young. I have the pleasure of working with an amazing group of compensation and benefits practitioners, and the ability to collaborate and brainstorm with them on client issues makes me an immeasurably better practitioner than I would be on my own.
Here’s what’s happening at your local NASPP chapter this week:
DC/VA/MD: Trevor Nelson and Karen Larbalestrier of Bank of America Merrill Lynch and Howard McFadden or Norfolk Southern present “Effective Communications of Equity Awards.” (Tuesday, August 20, 11:30 AM)
Seattle: Barbara Klementz and Sinead Kelly of Baker & McKenzie present “Getting Your Arms Around Global Equity Updates and Grant Acceptances Before It Gets Too Hot.” (Wednesday, August 21, 11:30 AM)
Wisconsin: Dan Walter of Performensation presents “10 Myths and Facts about ESPPs.” (Thursday, August 22, 12:00 PM)
The world is a social place. With the advent of social media and other avenues to interact online, people turn to the web to communicate, learn and interface. With online member profiles (Meet our Members), the NASPP has opened the door for you to get to know more about our member population – both personally and professionally. If you are an NASPP member and haven’t yet created a profile, I’ll use today’s blog to highlight the reasons why you should do this now!
5 Reasons to Create Your NASPP Member Profile
1. Put a face to your name. I can’t say how many times I’ve heard someone’s name, or heard them speak on a webcast, or had a name thrown in the hat for some idea. Putting a face with a name only helps people to get to know you better. Even if they don’t “know” you, they know you. Or, at least they feel like they do.
2. Self manage your information as it changes. Okay, so you change jobs, get a promotion or add a credential (CEP, anyone?) to your resume. You can self manage your profile details on the NASPP web site and your updated information is always there for the industry to see. Your profile is available to non-members, too, so keep that in mind when you meet that recruiter who may want to learn more about you by searching online. Keep everyone up to date on the status of “you”. You can even take the profile quiz again to “refresh” your answers at anytime, which can be interesting.
3. Let people get to know you personally, and you them. The profiles aren’t limited to just industry specific content. We have lots of “get to know you outside of work” questions in our profile quiz that help you get to know the whole person. Wondering what kind of personal information we incorporate? Take our “Name that Member” quiz below!
4. The member profiles show up in Google searches. Yes, it’s true. I tested this feature firsthand. I started with the first name on our member profile list (in alphabetical order) – Inta Abele of Charles Schwab. Her NASPP profile came up in the top 6 results from a Google search of her name. We all know people do it – they want to learn more about someone and Google them. So why not show the span of your affiliations and brand by having your NASPP profile show up in the results?
5. Build your brand. Building your brand is really a culmination of the above points. Getting your name and face out in the industry, showing that you’re engaged with industry organizations, and letting people know you more personally, all lends to creating the brand called “YOU”!
Have I convinced you to create your profile yet? We have over 100 member profiles on our site, and each week we “feature” a different member on our home page for the entire week! Be sure to update your profile if your contact information changes (click the “submit” link in the Meet our Members section of our web site to edit your profile.)
Name that Member
I thought it would be fun to do a quick guessing game about some of our members. Here are some interesting facts gleaned from some of our existing member profiles. Can you put the name to the fact?
1. Which member would be a U.S. History teacher if he didn’t work in stock compensation?
2. Which member cites her “investigative skills” as the one thing she couldn’t do her job without?
3. Whose favorite vacation idea is to ride her Harley to San Francisco?
4. Who would be running an auto repair shop if she didn’t work in stock compensation?
5. Who loves to play tournament poker in her spare time?
6. This person has been an NASPP member for 21+ years!
It only takes a few minutes to join the ranks of profiled members – why not do it now?
NASPP: What are a few key areas your panel will address with respect to your topic?
Patricia: Our panel will examine the different types of communication methods being used by corporate issuers with respect to performance grants, as well as provide recommendations on what to communicate to participants to clarify and convey the importance of these awards. Additionally, Craig Sidell from the NY Times will share how and what his company is communicating to their participants.
NASPP: What is the biggest challenge companies face?
Patricia: The biggest challenge for companies is how and what to communicate to their participants on performance grants to ensure they understand the value of the grants as well as how the grants and their corresponding performance metrics align with the company goals and strategic initiatives. Often this can be a communication challenge on many fronts for the company. They not only have to decide how and what to communicate to ensure the grants’ intended benefit is achieved but they are often constrained by what information can be provided, especially when using technology to provide the communication. Often there are technical limitations as to what information can be displayed and presented to the participant. This results in companies using additional communications methods to supplement. This can lead to further challenges with communication. Bi-bifurcated communication can leave the end participant confused as to the primary source of information and its accuracy.
NASPP: What is the silver lining to your topic?
Patricia: With all of the challenges, it’s easy for a company to get discouraged when it comes to communicating performance grants, but companies shouldn’t throw in the towel by any means! As the workforce becomes more and more tech savvy and technology tools become more flexible, our ability to communicate unique information is expanding. Many online tools are becoming more sophisticated and are allowing companies to communicate their specific needs to their participants. Using multiple communication methods, while challenging, can be complimentary to each other when done thoughtfully based on your company goals and your audience.
NASPP: What is your favorite NASPP Conference memory?
Patricia: My favorite NASPP Conference memory is from the 2006 NASPP Conference in Las Vegas since that is when I accepted my current role with Solium as head of Product Management, plus it was a great venue, and the Conference was packed with many informative sessions. While those who know me, know how much I love to fly–NOT!–it was a wonderful location and Conference. I still hear people mention that Conference all these years later!