The NASPP Blog

Monthly Archives: February 2014

February 27, 2014

The M&A Groundhog

I’m on the east coast, and we’ve had a long and brutal winter this year (at least by this California girl’s standards). So you may be able to imagine that I (along with millions of others oppressed by the frigid weather) breathed a huge sigh (not to be confused with a sigh of relief) when the famous groundhog, Punxsutawney Phil, saw his shadow on this year’s Groundhog Day (February 2nd). The folklore says that when the groundhog sees his shadow, winter will continue at least another 6 weeks – not welcome news for those of us who have been freezing for way too long.

What does Groundhog Day have to do with stock plans? What I wanted to suggest is that if there were a groundhog used to forecast stock plan activity (perhaps a cousin of the weather predicting one in Pennsylvania), I would bet that this year he’d be seeing his M&A shadow, suggesting a blockbuster year is ahead for M&A activity. The buzz is virtually everywhere from the Wall Street Journal to firms like Morgan Stanley and issuer companies themselves (to name only a few – there are many others) predicting a very robust M&A market this year.

Why We Care About M&A

Stock plan professionals know that a merger or acquisition often involves stock plans. Grants from an acquired company may be assumed or cancelled. New grants may be issued to incoming or existing employees as a result of the transaction. Not only is there likely to be stock plan activity, but it is possible we could be seeing record volumes and values of grants. Last week’s acquisition of WhatsApp by Facebook included $3 billion in restricted stock unit shares alone.

Why You Should Care About M&A

It’s important that stock plan administrators get a seat at the table in M&A task force meetings or discussions. Historically, it was not uncommon for the stock plan group to be among the last to know about the latest M&A activity, sometimes after the terms of the deal had been finalized. If stock plan shares are going to be a component of the transaction in any form, the stock plan group needs to be involved.The last thing you want is to find out that a deal is done, and the terms are just too challenging to administer. Or, they can be handled, but only with great effort and time consuming labor involved.

Brush Up On Your M&A Needs and Wants

Here are a few suggestions to get your brain working on the M&A front:

  • Put your feelers out. M&A may or may not be a present internal topic of discussion, but you can start the discussion. Let key decision makers know that you want to be involved from the get-go should the M&A bug take hold in your company. It’s not too soon to have a conversation – even if you’re not aware of any imminent activity.
  • Brush up on what you’d actually need if an M&A transaction landed on your doorstep. Sure, you may not be able to predict everything you’d need right now, but you can remind yourself of the key things that you’d likely want to know if someone was standing at your door informing you that your company just acquired that XYZ company down the block. It’s not uncommon for there to be little or no advance warning for a merger or acquisition. In thinking through the types of things you’d need to know, you’ll be much better prepared if and when that day comes.
  • With the most promising M&A season in years upon us, now is a great time to revisit the NASPP’s M&A portal. There are articles to remind you of what you need to know if you find yourself handling M&A activity. There is also a sample M&A Conversion Checklist and other tools to ease you through the process.

Only time will tell if our fictional stock plan groundhog would have been right. Given the accuracy of the groundhogs so far this year, perhaps it’s time to get ahead of the game on this one.


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February 26, 2014

NASPP To Do List

Tip #7 for Submitting a Winning Speaking Proposal
Be concise! For the love of Pete, be concise! We receive around 150 proposals and we have to read them all.  Several times.  Please just get to the point.

Also, be sure to check out our Top Ten Tips for Submitting a Successful Proposal and submit your proposal today.

NASPP To Do List
Here is your NASPP to do list for this week:

– Barbara

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February 25, 2014

Bifurcating Stock Plan Proposals

It’s once again proxy season and many companies will be asking their shareholders to vote on proposals relating to their stock plan.  Most of these proposals probably add more shares to the plan, but there are a number of other plan amendments companies might seek shareholder approval for, including:

  • To add a new type of award that can be granted under the plan
  • To change the employees eligible to participate in the plan
  • To increase the limit on the number of shares that can be granted to one employee or some other plan limit
  • To extend the term of the plan

In some cases, companies aren’t making any changes at all to the plan, but are merely seeking shareholder approval to preserve the plan’s exempt status under Section 162(m) (where a plan doesn’t state the specific performance conditions that awards will be subject to, the plan has to be approved by shareholders every five years). 

To Bundle or Not Bundle

It is not unusual for a company to have two or more changes to their stock plan that they are asking shareholders to approve.  Where this is the case, the company can bundle all the changes into one proposal or can present each change as a separate proposal subject to a separate vote. 

Mike Melbinger of Winston & Strawn recently noted in his blog on (“Should Companies Bi-Furcate Their Request for Shareholder Approval of Stock Incentive Plans?” January 27, 2014) that the SEC has added a new Compliance and Disclosure Interpretation that blesses bundling all plan amendments into one proposal. 

Bundling presents shareholders with an all-or-nothing proposition; they either approve all the changes or they approve none of them. It seems to me that this could go either way for the company. If shareholders are a little opposed to some of the changes but mostly supportive, they might overlook their niggling doubts and vote for the proposal. On the other hand, if shareholders strongly oppose one of the changes, they might vote against the entire proposal and the company doesn’t get any of the changes that it wanted. 

Shareholders Wanting Their Cake and Eating It Too

Mike notes in his blog that there have been some recent lawsuits alleging improper bundling of changes (and expresses hope that the SEC’s new CDI will help resolve/prevent these suits), particularly where one of the changes is beneficial to shareholders.  This is interesting to me because my guess is that where a company bundles a shareholder-friendly change with another change, the shareholder-friendly change is probably included solely to pave the way for shareholders to approve the other change.

For example, a company might bundle a proposal allocating new shares to the plan with an amendment to restrict the company from repricing options without shareholder approval.  The repricing restriction is likely included because the company has received negative feedback from shareholders on this issue (repricing without shareholder approval is considered a poor compensation practice by ISS) and is afraid the share allocation won’t be approved without it.  The two proposals have a symbiotic relationship: the company isn’t willing to agree to the repricing amendment unless shareholders agree to the share allocation. Forcing companies to unbundle the two amendments means the company could end up having to implement the shareholder-friendly amending without getting the other change that it wanted.

A Poll

I conclude this blog with a short poll on how you are handling your shareholder proposals this year.

– Barbara

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February 24, 2014

NASPP Chapter Meetings

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

San Diego: Takis Makridis and Robert Slaughter of Equity Methods present “The Game has Changed: 10 Things You Want Your Comp Committee to Know BEFORE Grants are Issued.” (Tuesday, February 25, 11:30 AM)

Chicago: Nicole Dmitruchina of EASI presents “The Treatment of Equity Awards Upon Termination.” (Wednesday, February 26, 7:30 AM)

Silicon Valley: Alison Wright of Baker & McKenzie presents “DOMA Decision’s Impact on Equity Compensation.” (Wednesday, February 26, 11:30 AM)

Phoenix: Takis Makridis and Robert Slaughter of Equity Methods present “10 Things You Want Your Comp Committee to Know BEFORE Grants are Issued.” (Thursday, February 27, 11:30 AM)

Boston: Chuong Pham and Kelly Neider of EASI present “The Treatment of Equity Awards Upon Termination.” (Friday, February 28, 8:30 AM)

Las Vegas: Barbara Klementz of Baker & McKenzie presents “Are Your Equity Awards Ready for CHANGE?” (Friday, February 28, 11:30 AM)

Philadelphia: The chapter presents “Mergers, Acquisitions, and Spinoffs, Oh my! ” (Friday, February 28, 8:30 AM)


February 20, 2014

A New Reach for Stock Ownership Guidelines?

Over the past five to seven years or so, the prevalence of stock ownership guidelines within organizations has evolved from an emergent to standard practice. By now most of us are comfortable with the concept of stock ownership and share retention guidelines, along with their application to (mostly) executive management.

When Intel Corporation recently disclosed that they had revamped their compensation structure, a segment of the changes caught my attention. Intel has expanded the application of their stock ownership guidelines from 50 to 350 senior leaders in 2014. Could this be the start of a movement towards more mainstream stock ownership requirements within organizations?

A Recap of Trends

In Equilar’s 2013 Stock Ownership Guidelines Report, available in the NASPP’s Stock Ownership Guidelines portal, we are reminded that:

  • 89.4% of Fortune 100 companies publicly disclosed executive stock ownership policies in 2012
  • The majority of Fortune 100 companies (55.9%) have both stock ownership guidelines and retention policies, versus one or the other
  • 82.3% of analyzed companies use a multiple of base salary as the guideline structure
  • 85.2% of companies allow a 5-year accumulation period to satisfy their guidelines

Data collected from the NASPP’s 2011 Domestic Stock Plan Administration Survey (co-sponsored by Deloitte Consulting) supports the trends identified above. In the NASPP survey, only 12% of surveyed companies said that their stock ownership policies applied to “other management” (meaning levels below the CEO/CFO, NEO and other senior management levels of the organization). It looks like Intel is now venturing into that territory of “other” management, and I’m curious to know if the reach of ownership policies is now beginning to trend into that category of organizational leadership. In 2011, 17% of respondents in the NASPP/Deloitte survey reported that they had increased the number of employees subject to their policies within the past 3 years. Those aren’t necessarily landslide numbers, but that was also during a time when share ownership guidelines were just gaining a foothold in the upper echelons of corporations.

The trend radar is up, and we’ll be keeping an eye to see if other companies are following suit into expanding the reach of their stock ownership guidelines. If you’re an issuer, take the informal poll below and be one of the first to see if there are signs of a new reach for stock ownership requirements.


Who is covered by your company’s stock ownership guidelines? (check all that apply)

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February 19, 2014

Loopholes, Return on Execs, and More

Here are a few items that recently showed up in my Google Alert/email that I found interesting.

Return on Executives
Exequity is promoting a new way to measure alignment of pay with performance: return on executives (ROX).  This measure compares the change in compensation paid to executives with the aggregate change in shareholder wealth.  According to Exequity’s alert, ROX results in greater correlation between pay and performance and fewer disconnects in pay for performance alignment than other models (e.g., relative degree of alignment) typically used by ISS, Glass Lewis, and institutional investors.

The alert doesn’t go into a lot of detail on the calculation, but if you are having trouble with your Say-on-Pay story, maybe you should give Exequity a call.

Canada’s Loophole
Activists in Canada are jumping on the stock options loophole bandwagon.  Their objection isn’t related to corporate tax deductions, however (companies already don’t typically get a deduction for stock compensation in Canada).  Stock options that meet certain requirements are taxed as capital gains in Canada, which generally results in a 50% income deduction.  The requirements seem to be somewhat straightforward (you can read about them on pg 28 the NASPP’s Canada Guide) and there isn’t a limit on the number of shares that can qualify for this benefit, like there is with ISOs in the US. Canadian tax activists think option gains should be taxed as compensation.  But I wonder, if the options are taxed as compensation, shouldn’t companies then be entitled to a corporate tax deduction for them? 

Less Disclosure
It’s not often that you hear about the SEC reducing the disclosures companies are required to make.  Recently, however, the Corporation Finance staff updated the SEC’s Financial Reporting Manual to reduce the amount of disclosure companies have to make about their pre-IPO stock price valuations.  The SEC doesn’t note what is new in the Manual, but a blog by Polk Davis describes what has changed with respect to the disclosures. This seems to be an outcome of the SEC’s Reg S-K study that I blogged about last week.

– Barbara

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February 18, 2014

NASPP Chapter Meetings and To Do List

Because yesterday was a holiday, I’m combining the announcement of NASPP chapter meetings for this week with the NASPP To Do List. We’ll return to our regularly scheduled blogs tomorrow.

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

San Francisco: Barbara Wallace of Oracle, Stacy Fox of, and Marcel Provencher of HP present “Merge, Purge or Scourge? How to Best Handle Assuming Equity Plans.” (Wednesday, February 19, 11:30 AM)

Orange County: Emily Cervino of Fidelity and John Wolff of GuideSpark present “Stock Compensation Goes to Hollywood.” (Thursday, February 20, 11:30 AM)

Atlanta: Valerie Diamond and Nicole Calabro of Baker & McKenzie present “Critical Provisions in Any Equity Grant Agreement – Why They are There and How They Can Hurt (or Help) You.” (Friday, February 21, 11:30 AM)

I’ll be at the San Francisco chapter meeting; I hope to see you there!

Tip #6 for Submitting a Winning Speaking Proposal
Be unique, fresh, and innovative.  We want new and different ideas, not the same old, same old. Also, don’t present your ideas at other venues before the Conference. When we can see that a proposal is slated to be presented at other industry events before the NASPP Conference (and we check for this), we are less likely to accept the proposal. The NASPP Conference is the premier event for stock plan professionals; we didn’t achieve this status by rerunning presentations from other events. 

Once you’ve  presented your topic at the NASPP Conference, you are free to present it wherever else you want, but wait until after the Conference to do so.

NASPP To Do List
Here is your NASPP to do list for this week:

– Barbara

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February 13, 2014

Is Your Brand in Critical Condition?

Today I’m going to bring up a topic that is softer in nature, but critically important to your career path in equity compensation: building your personal brand. Now, I know some of you may be thinking – “I don’t have time to think about my brand!” If that’s you, recognize that you are not alone. In fact, you have a lot of company in that mindset. I’ll attempt to convince you why you should be actively working to build your personal brand, starting today.

Is your brand on life support?

There are a lot of estimates, guesstimates, and surveys that try to pinpoint just how many people are a bit, shall we say, “relaxed” when it comes to focusing on their personal career brand. One study quoted on suggested that 45% of people don’t think about it at all, ever. That got me thinking about how many of us probably realize that it’s a good thing to create a name for yourself in this industry, but haven’t put the priority into actually doing it.

Building a brand is about two things: recognition for your value inside the company, and recognition for your value outside of the company. I think many people tie their brand to the next job search – meaning that it only needs to be worked on, or polished off, when it’s time to look for that next position. That is a mistake. The process of working on your personal brand should be ongoing – there isn’t an end to the process.

5 Quick Ways to Build Your Brand

I’m a fan of tangible action items, so I’ve gleaned some tips from many resources on brand building. Here are 5 of my favorites – and they are all things you can do or begin right away.

#1. Own your online presence. “If you don’t brand yourself, Google will brand you,” says Sherry Beck Paprocki, co-author of the book, “The Complete Idiot’s Guide to Branding Yourself”. According to the New York Times, “That means you need to try to control what information comes up when your name is searched online by a potential employer, as it inevitably will be. Will she see a professional LinkedIn profile or that embarrassing photo of you from Halloween 2005?”

Have you ever Googled yourself? Try it and see what comes up. An increasing number of recruiters and employers are trolling online sites to learn as much as possible about prospect candidates, often before scheduling interviews. Be very careful about what you post online, as almost nothing stays hidden forever. According to data published in the Wall Street Journal, 44% of employers consider trashing another employer on social media to be a hiring deal breaker. 30% of employers consider the use of foul language (even if not employer related) a guaranteed trip to the reject pile as well. The bottom line: guard your online presence and use your best judgment, even on personal social media sites.

#2. The rich is in the niche. I can’t guarantee you’ll be monetarily rich from picking a niche, but your brand will likely become more lucrative if you master a few things rather than dabble in many. How do you choose a niche? Think about what you like the most about equity compensation. Are you crazy about calculating taxes? Do you love recordkeeping? Are you a lovable accounting geek? Figure out what gets you excited and start there. Next, think about your unique strengths. Are you really good with details? Do you have a knack for writing or performing calculations in your head a light speed? The key to the niche is marrying your passions with your unique skills.

#3. Show your face. All I can say here is network, network, network. A 2010 survey by Right Management (an arm of staffing giant Manpower) reported that 41% of respondents said they landed a job through networking. I’ll make an unscientific guess that in this small industry of equity compensation, that number is even higher. Never underestimate the power of a strong network. How do you jumpstart a network? Volunteering in the industry (including local NASPP chapters), participating in industry events, attending conferences, speaking, and mentoring new professionals should give you a few ideas.

#4. Add more value. Let’s face it, we live in a culture driven by an ever-present question: “what’s in it for me?” When it comes to increasing your brand value, the number one thing you can do to ensure sustained growth of your brand is to add value to your community first. So in everything you do ask yourself if you’re adding value. What are examples of adding value? Creating something really useful, solving a problem that has yet to be solved, being accessible/approachable/and helpful, developing a unique expertise, teaching a new skill. It’s a simple shift in approach that can bring huge returns to your brand.

#5. Create a LinkedIn profile and keep it updated…regularly! LinkedIn’s own statistics report that only 50.5% of users have a “complete”profile. That screams “untapped potential” to me. The average LinkedIn user spends 17 minutes per month on their profile. At the same time, 94% of recruiters use LinkedIn to vet candidates. Imagine if you just completed your profile and spent 20 minutes a week managing your profile, making new connections, and participating in groups. You’d be way ahead of the “average”.

Bonus: Write down three career goals that will help you build your brand. When I say “write down” I mean, “write down.” The best way I can give color to what I mean is to share the story of a study of 1979 Harvard Business School MBA students. There have been articles and books that depict this study, and it’s been widely analyzed, but I’ll summarize it as described by the site Life Mastering: “In the book ‘What They Don’t Teach You in the Harvard Business School,’ Mark McCormack discusses a study conducted on students in the 1979 Harvard MBA program. In that year, the students were asked, “Have you set clear, written goals for your future and made plans to accomplish them?” Only three percent of the graduates had written goals and plans; 13 percent had goals, but they were not in writing; and a whopping 84 percent had no specific goals at all.

Ten years later, the members of the class were interviewed again, and the findings, while somewhat predictable, were nonetheless astonishing. The 13 percent of the class who had goals were earning, on average, twice as much as the 84 percent who had no goals at all. And what about the three percent who had clear, written goals? They were earning, on average, ten times as much as the other 97 percent put together.” Hmmm…something to think about.

Building a personal brand you can be proud of is not hard, but it does take consistent work. For more tips and resources, visit the NASPP’s Career Center. We’ve got an entire blog dedicated to career development, resources, and our Equity Expert podcast series.


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February 12, 2014

NASPP To Do List

What Does the Movie “The Monuments Men” Have to Do with the NASPP’s Global Portal?
Louis Rorimer, long-time contributor to the NASPP and currently the editor of the country guides in our Global Stock Plans Portal, is the son of one of the original Monuments Men that the movie is based on.  The Monuments Men were a group that tracked, located, and returned artwork that the Germans stole during WWII.  They ultimately saved over five million works of art.  Matt Damon plays the character based on Louis’ father (they added some character flaws so they changed the last name of the character–that’s Hollywood for you).  Louis attended the premier of the movie in NY and met both Matt Damon and George Clooney, who directed the movie.  Want to know more? Here are a few resources to check out:

  • Pictures from the movie and of the original Monuments Men, including a couple of pictures of James Rorimer, Louis’ father.
  • An interview with Louis about the movie and his father.
  • An other article about Louis’ father.

Tip #5 for Submitting a Winning Speaking Proposal
Don’t put all your eggs in one basket! Every firm can submit up to three proposals for the NASPP Conference–take advantage of this. Submitting three proposals triples your odds of getting a speaking slot.  And it’s much easier for us to fit you into the agenda if you give us several different topics to pick from. 

Submit a speaking proposal today.

NASPP To Do List
Here is your NASPP to do list for this week:

– Barbara

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February 11, 2014

SEC Considers Revamping Reg S-K

Just when you thought you were finally getting a handle on the executive compensation disclosures, the SEC is considering changing them.  According to an alert by McGuireWoods, the SEC staff has reviewed the disclosure requirements of Reg S-K (all of them, not just the disclosures relating to executive compensation) and issued a report that includes recommendations for further review.  The JOBS Act of 2012 (not to be confused with the Jobs Creation Act of 2004) required the study with respect to disclosures by emerging growth companies, but the SEC expanded it to cover all companies.

The staff’s recommendations with respect to the executive compensation disclosures are fairly vague; they point out that these disclosures can be quite lengthy and technical and further review might be warranted on this basis, as well as to confirm that the information disclosed is useful to investors.  The staff also suggests that the disclosures be reviewed to determine if they need to be made simpler for smaller companies. 

So maybe the disclosures will change and maybe they won’t.  According to the report, there weren’t any comments submitted to the SEC’s JOBS Act website on the executive compensation disclosures.  Interestingly, there were two comments suggesting that the table disclosing the number of shares outstanding and available for grant under stock plans approved by shareholders and not approved by shareholders could be eliminated (and one comment that this table shouldn’t be eliminated, proving once again that you can’t please all the people, all the time). 

According to McGuireWoods, at this time, the SEC is still formulating an action plan with respect to the study; a time frame hasn’t been specified for completing any further reviews called for under the study, much less promulgating and transitioning to any new rules.

Did You Know?

I did learn a couple of interesting tidbits when reading the section of the SEC’s report that covered the executive compensation disclosures. I thought you might be interested to know that:

  • The executive compensation disclosure rules have been amended more often than any other rules for disclosures required under Reg S-K.
  • The executive compensation disclosures, albeit in a very different format, have been around since the very first registration statement (Form A-1) implemented in 1933. 
  • Back in 1933, the disclosure was required for any directors, officers, or other persons earning in excess of $25,000.  This seems like a pretty low threshold, but then I ran the amount through the Bureau of Labor Statistic’s inflation calculator.  In today’s dollars, that’s around $450,000.
  • In 1972, the threshold for disclosure was increased to compensation in excess of $40,000. According to the inflation calculator, that’s around $223,000 in today’s dollars. 
  • It wasn’t until 1992 that the threshold was increased to $100,000. In today’s dollars, that’s about $166,000.  $40,000 in 1972 was the equivalent of about $134,000 in 1992, so my guess is that we have a ways to go until the SEC decides to increase the threshold again.

– Barbara

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