The NASPP Blog

Monthly Archives: September 2014

September 25, 2014

SEC Enforcement Actions for Section 16 Reporting Violations

Over the past year, I’ve blogged about various enforcement actions pursued by the Securities and Exchanges Commission, many with no warning or indication that the targeted area was one of concern. Enforcement has been a self proclaimed focus of the SEC for a while now, and the latest string of actions sends a message that even small violations are subject to scrutiny. Once again, we have a new area targeted for the SEC’s scrutiny, and it’s one where most of us in equity compensation have a great deal of familiarity: Section 16 reporting. That’s right, reporting insider transactions (mainly those on Form 4 in this case) and also those on Schedules 13D and 13G. Another string of violations was discovered where companies failed to disclose insiders’ violations in the Proxy Statement per Item 405 of Regulation S-K.

A Slew of Section 16 Enforcement Actions

On September 10th, the SEC announced enforcement actions against 34 individuals and companies (28 individuals and investment companies, and 6 publicly traded companies). The actions brought against the individuals were for failing to promptly report their changes in holdings as required under Section 16 of the Securities and Exchange Act. The actions brought against the companies were for their contribution to the filing failures or for failing to report filing delinquencies.

What Else is Up for Grabs?

On the same day that the SEC announced the Section 16 enforcement actions, they also announced that they had filed fraud charges against a biotech company and its CEO. The fraud charge stems from a failure to report $1.5 million in sales of the company stock by the CEO over a two year period. Ouch, on the surface that seems to be pretty blatant. While that’s one example of an egregious set of violations, some of the other actions taken the by SEC in the other Section 16 cases seem to indicate that they want to send a message that no transaction is too small. With more advanced monitoring and analysis capabilities, the SEC appears to by saying that “a violation is a violation”.

It Ain’t Cheap

The penalties for the said violations haven’t been cheap. Most of the cases (all but one) were settled with the SEC for amounts ranging between $25,000 and $100,000 for individuals, $60,000 to $100,000 for investment companies, and $75,000 – $150,000 for companies who contributed to the delinquency of their officers and failed to properly report delinquent filings.

Next Steps

Some of you may be wondering what you can do to determine if there is risk to your company. There’s no telling if the SEC will continue their review in this area. However, given that there have been many areas of investigation and given that the SEC has said that enforcement is an area of focus in terms of initiatives, companies should take a look at their Section 16 compliance practices to identify any potential areas of concern (filing failures) or any process gaps.

If you want to get some further insight on the matter you may consider attending Alan Dye and Peter Romeo’s session “Section 16 & Insider Considerations in Today’s Market” at the NASPP’s 22nd Annual Conference next week. I’m betting this topic will be on the table for discussion.

My next blog will be photos of the Conference – live from Las Vegas. Maybe not everything that happens in Vegas stays in Vegas! I look forward to seeing many of you next week!




September 24, 2014

Be in the Know Before You Go!

The 22nd Annual NASPP Conference in Las Vegas is less than a week away! My careful research reveals that everyone who is anyone in stock compensation is going to be there so, by now, I’m sure you have your registration completed and your hotel room reserved.  Today I break from the Wednesday “NASPP To-Do List” tradition to instead provide some handy “know before you go” tips for the Conference:

Free WiFi
Enjoy free WiFi at the NASPP Conference, courtesy of our sponsor, UBS Financial Services.  To access the WiFi:
Code: UBS2014

Luncheon Roundtable Discussions
Join a lunch roundtable discussion on September 30 to exchange ideas with like-minded individuals on topics you are interested in. This is a great way to share tips and experiences with fellow attendees and build your network.  When you get to the luncheon room, the tables set aside for roundtable discussions will be identified with balloons.

Got a Question? Ask an Expert
The Ask the Experts Booth is a great opportunity to obtain free guidance on the challenges you are facing today.  Can’t get to the booth?  We have close to 50 stock plan experts that have volunteered to be available to answer your questions throughout the Conference; see the full list of experts.

Print the Materials
If you chose to use the Conference app instead of receiving the books, and would like hard copies of the presentations you will be attending for note-taking purposes, you can print copies using the web version of the app or the online materials website. (The app also includes note-taking capabilities if you want to be completely electronic.)

Download the Conference App
Download the NASPP Conference app (sponsored by E*TRADE Corporate Services) for your mobile guide to the NASPP Conference.  Create your own custom schedule, connect with Conference attendees, access session materials, and more.

Win a GoPro Camera; Play the Networking Game
Download the Conference app and play the Networking Game for a chance at winning a GoPro camera.  There are some game challenges that can be completed before you even get to the Conference; start playing today and you’ll be that much closer to winning when you get to Las Vegas.

I look forward to seeing everyone in Las Vegas!

– Barbara


September 23, 2014

Correcting ISS

Have you ever thought that ISS got something wrong in their analysis of your stock plan?  Now you have an opportunity–albeit short–to correct them.  ISS has launched a new “Equity Plan Data Verification Portal” that allows you to see the data they are basing their analysis of your plan on and correct any errors therein.


As you all know, when a new stock plan is submitted for approval (or shares are requested for an existing plan), ISS performs an analysis of the plan.  The analysis looks at the features of the plan, as well as various statistical data (e.g., shares granted in the past three years, common stock outstanding).  ISS collects the information used in their analysis from the information about the plan included in the proxy statement as well as the company’s other public filings (e.g., the ASC 718 footnote included in the financial statements).  There are a lot of different sources of data, many of them are long and tedious, and some companies do a better job of clearly describing their stock plans than others. So there’s always a possibility that ISS will make a mistake.

Until now, there hasn’t been any way to discover and address a mistake in ISS’s analysis until after they’ve published their recommendation on the plan.  The Equity Plan Data Verification Portal gives companies a chance to preview the research ISS has completed on their plan and let ISS know if anything doesn’t seem correct.

How the Portal Works

You have to register for a login to the portal. Once you have registered, you’ll get an email notifying you when your company’s equity plan information is available to review.  Then you’ll have two days to review it–from 9 AM Eastern on the first business day after your company’s data is published to the portal until 9 PM Eastern the following business day.  ISS has published an FAQ that includes a list of items they research on equity plans; you could go through this list in advance and note all the answers. That will make it a lot quicker to validate ISS’s analysis once your two-day review window opens.

Note that this is only available for companies that file their proxy statement at least 30 days before their annual meeting.

Beware the Spam Filter

My first thought upon reading about the two-day window was, “Gosh, what if the notification email goes into your junk email folder?”  It could happen.  If you miss the two-day window because you don’t get the email notice, my guess is that there’s not much you can do about it, since ISS is under a time-crunch to publish their recommendation.  So you might want to register multiple people at your company and maybe even register both your work and your personal email addresses.

What Do You Think?

And now, a quick poll–will you use ISS’s new Equity Plan Data Verification Portal?

Don’t Miss the 22nd Annual NASPP Conference
Be sure to attend the panel “Navigating ISS & Glass Lewis” at the 22nd Annual NASPP Conference to learn more about engaging with ISS and Glass Lewis.

I’m looking forward to seeing everyone in Las Vegas! Be sure to tune in tomorrow when I’ll be offering some last minute “Know Before You Go” tips for Conference-goers.

– Barbara

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September 22, 2014

NASPP Chapter Meetings

Here are the NASPP chapter meetings for this and, since the 22nd Annual NASPP Conference is next week, we’ve included next week’s meeting as well:

Atlanta Eric Larre and Jim Kroll of Towers Watson and Reid Pearson of Alliance Advisors present “Executive Compensation:  Top Ten Issues for the Upcoming Proxy Season.” (Wednesday, September 24, 8:00 AM)

Michigan The chapter presents “The Treatment of Equity Awards upon Termination.” (Friday, September 26)

Las Vegas: The 22nd Annual NASPP Conference in Las Vegas kicks off with a chapter meeting for local NASPP members and guests.  Art Meyers of Choate Hall & Stewart presents “Hiring and Firing Executive Officers: Equity Compensation Issues.”  All meeting attendees are invited to stay for the opening reception of the NASPP Conference.  This is a great opportunity to hear from one of the nation’s foremost experts on stock compensation and to see what the NASPP Conference is all about.

In addition, the Florida and Los Angeles chapters are hosting get-togethers at the 22nd Annual NASPP Conference for their members that will be in attendance.

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September 18, 2014

Keeping Up 2014

Our popular “Meet the Speaker” series, featuring interviews with speakers at the 22nd Annual NASPP Conference, is a 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 an interview with Wendy Jennings of Riverbed Technology, who will lead the session “Keeping Up 2014:  More Issues You Should Have on Your Radar.”  Here is what Wendy had to say:

NASPP:  Why should attendees go to your session?

Wendy: We will discuss issues that stock administrators may not think about in their day-to-day administration but that can creep up on you if you don’t watch out.  We want to help prevent the “gotchas” that stock administrators either don’t have to think about every day or new issues that they might not have ever had to think about.

NASPP:  What are some best practices companies should implement?

Wendy: I think one of the most important practices is to plan well in advance of equity events.  Knowing the issues ahead of time will ensure smooth administration of events and prevent errors or issues related to non-compliance.  For example we will discuss best practices around the administration of performance-based awards, maintaining an insider list and making sure your data privacy consents are in order.

NASPP:  What is the silver lining in your session?

Wendy: Attendees can learn about the issues and problems we have experienced and avoid the “gotchas” altogether.

NASPP:  Tell us three things people don’t know about you.

Wendy: I have a twin brother, I have a special-needs son, and I have taken up tennis in the last year thanks to the inspiration from my special-needs son who is learning tennis through the Special Olympics.

Don’t miss Wendy’s session “Keeping Up 2014:  More Issues You Should Have on Your Radar” at the NASPP Conference!

About the NASPP Conference
The 22nd Annual NASPP Conference will be held from September 29-October 2 in Las Vegas. This year’s program features 60+ sessions on today’s most timely topics in stock compensation; check out the full agenda and register today!

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September 17, 2014

NASPP To Do List

Download the NASPP Conference App; Win a GoPro Camera!
The NASPP Conference app is now available!  Download the app for Apple or Android devices in the iTunes or Google Play store (search for “NASPP”).  Blackberry and Windows device users (including laptops) can access a web version of the app at  All NASPP Conference attendees that download the app, confirm their account, and log in by this Friday, September 19, will be entered in a raffle for a GoPro camera.

Didn’t receive your confirmation email?  If you are already registered for the Conference, click the “Didn’t receive confirmation instructions?” link in the app login window to have the instruction sent to you again.

Another Chance at Winning a GoPro Camera!
You can qualify for another chance at winning a GoPro camera by playing the Networking Game in the app.  You earn points in the game by taking pictures to complete the assigned challenges.  You only need to complete a few challenges to qualify for the raffle and you get one entry for every 50 points that you earn (some challenges are worth more points than others).  There are some challenges you can complete before you get to the Conference, so get going today and you’ll have a head start by the time you get to Las Vegas!

Just Two Weeks Left!
There are less than two weeks left until the “22nd Annual NASPP Conference” and the hotel is close to selling out.  The Conference will be held from September 29 – October 2 in Las Vegas.  Don’t miss this landmark event—view the full agenda and register today.

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

  • Download the NASPP Conference app today from the iTunes or Google Play stores (search on “NASPP”).  Don’t wait–log into the app by this Friday, September 19 for a chance to win a GoPro camera.
  • Start playing the Networking Game to get a head start on winning another GoPro camera.
  • Listen to our new Equity Expert podcast, featuring an interview with Scott Witz of W.W. Grainger.
  • Make your hotel reservations for the 22nd Annual NASPP Conference. The hotel is nearly sold out; don’t wait or you’ll end up having to stay at a different hotel.
  • Check out the fantastic program for the 22nd Annual NASPP Conference. The Conference will be held from September 29-October 2, 2014 at the Mandalay Bay in Las Vegas.
  • Take this week’s Question of the Week Challenge.
  • Renew your NASPP membership for 2014 (if you aren’t an NASPP member, join today). Check out the NASPP’s LinkedIn, Facebook, and Twitter pages.


– Barbara


September 16, 2014

Four Fundamentals of Financial Reporting

Our popular “Meet the Speaker” series, featuring interviews with speakers at the 22nd Annual NASPP Conference, is a 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 an interview with Kathy Biddle of Equity Administration Solutions Inc., who will lead the session “Four Fundamentals of Financial Reporting for Equity Compensation.”  Here is what Kathy had to say:

NASPP:  What is a common misperception about financial reporting?

Kathy: I think companies underestimate the impact of plan design on accounting, reporting and administration.   Often problems arise once the program is in place and can have unexpected costs.  Taking the time to coordinate all aspects in advance saves time and money.

NASPP:  What common mistake do companies make and how can they avoid it?

Kathy: The biggest mistake companies can make is to not think about all aspects of equity in advance.  Consider the regulatory aspects, accounting impact, system capabilities and administrative burden before you implement.  Then you will see the benefits of your equity for your participants.

NASPP:  What is the silver lining?

Kathy: The things we recommend have no additional cost to implement.  And they will help build a cohesive team atmosphere during plan design and implementation.  Lastly they will help prevent unexpected hazards along the way.

NASPP:  Tell us three things people don’t know about you.


  1. I live in a very rural area of central Pennsylvania with my children and grandchildren.
  2. I like to paint, needlework and read for relaxation.
  3. I really like what I do—I’ve always had service type jobs and enjoy helping people.

Don’t miss Kathy’s session “Four Fundamentals of Financial Reporting for Equity Compensation” at the NASPP Conference!

About the NASPP Conference

The 22nd Annual NASPP Conference will be held from September 29-October 2 in Las Vegas. This year’s program features 60+ sessions on today’s most timely topics in stock compensation; check out the full agenda and register today!

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September 15, 2014

NASPP Chapter Meetings

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

Silicon Valley: John Hamman and Sebastian Goerg of Florida State University present “Compensation Programs and Their Behavioral Consequences.” (Tuesday, September 16, 11:30 AM)

Seattle: Barbara Klementz and Valerie Diamond of Baker & McKenzie present “How to Conquer the World: Best Practices for Global Equity Compliance.” (Wednesday, September 17, 11:30 AM)

Wisconsin: Rive Rutke of Deloitte Tax presents “Employment Tax and Equity.” (Wednesday, September 19, 11:45 AM).

I’ll be at the Silicon Valley chapter meeting; I hope to see you there!

– Barbara


September 11, 2014

Stress Testing Your Equity Compensation Plan

It’s been a while since I’ve heard a new buzz word floating around the equity compensation circles. Today I’ve got one for you – “stress test”. Okay, technically that’s two words, but who’s counting? Anyhow, what’s a stress test? No, it’s not a mechanism to measure your personal level of bliss or distress in administering equity programs, or how a sudden acceleration of vesting is going to impact your blood pressure. This is about putting the payout structure for your equity plan design to the test – literally.  In today’s blog, I want to explore this concept that has existed in compensation circles, and seems to be expanding to include longer term equity incentives on a broader basis.

What is a Stress Test?

The idea behind stress testing is to look at a potential range of compensation outcomes for a plan or program, and then evaluate those compensation outcomes in conjunction with several risk/opportunity scenarios for the overall business. The goal? Determine where potential value imbalances, windfalls, and other sub optimal compensation outcomes may exist when the plan is evaluated in consideration of overall business factors and performance as a whole.  Companies want their performance (and other time based) payouts to be commensurate with the performance of the business and the value created for shareholders. For example, it’s not going to excite shareholders if executives received a huge windfall during a time when the company has stopped paying dividends. The goal of most performance programs is to align significant payouts with upward and profit creating (for shareholders) achievements in company performance. Yet, even with good intentions in plan design, the two don’t always match up when the value received by executives is compared to the value received by shareholders. Enter the stress test as a means to more thoroughly unearth any inconvenient truths that may have been overlooked or not considered in advance of implementing a particular award program.

An Art and a Science

The concept of stress testing pairs both art and science. It’s impossible to predict with 100% accuracy the true path of an equity award – both in terms of the company’s performance, stock price performance, an unforeseen factors.  This translates to an art involved in choosing the right scenarios to model as potential impacts to company performance and shareholder value. There are possibilities and probabilities and that’s the focus of stress testing. Evaluate multiple potential impacts and assess the probable end result on the equity compensation plan awards. How will a merger impact things? What happens if earnings targets are missed or overachieved? Once some scenarios are created, and the overall potential impact is assessed, a calculation is performed to determine the value that the executive would receive. The potential value to shareholders in these scenarios is also modeled and the two are compared. While not a guaranteed method of predicting the future, stress testing can provide more data and alternative scenarios for companies to consider before issuing performance and other equity awards.

One thing of note – stress testing is not limited solely to the performance component of the awards. Companies are looking at the impact of company risk/opportunity factors on the equity compensation package as a whole. For example, let’s say an executive has 50% of their shares in performance awards, and 50% in stock options. The company meets certain objectives and the performance awards pay out at the maximum level. The “stress test” that has been done to model this scenario in advance also considers the impact of those company/market conditions on the stock option portion of the executive’s equity compensation package as well. Is there a windfall on the horizon? The objective is to ensure that shareholders are getting paid first, and that the executive’s overall compensation potential does not exceed the value created for shareholders. If the cumulative “reward” to the executive for all of his awards is not aligned with shareholder value, then the company would likely modify the proposed payout structure to close the gap.

For More Information

I recently caught up with Scott Witz, VP of Compensation and Benefits for W.W. Grainger. During a brief podcast interview (part of our Equity Expert podcast series) he explained how Grainger approaches stress testing of their equity awards (along with other tips on administering performance awards). The nice thing about podcast interviews is that they are short! So check out Scott’s interview for some real information on how Grainger is approaching stress testing and their performance awards. Also, this concept will be addressed by Scott and other panelists in they Keynote session: Performance Awards: What Companies Need to Know Before Making Their Next Grant at our 22nd Annual Conference in Las Vegas later this month (September 29 – October 2nd). You won’t want to miss it!

Lastly, I note that the date of this blog is September 11th. Just like the bikers who stand on my street corner the morning of each September 11th waving their huge flag year after year in remembrance, we don’t and won’t forget.


September 10, 2014

NASPP To Do List

Stress Testing Performance Awards
Listen the latest episode in our Equity Expert podcast series: Scott Witz of W.W. Grainger on stress testing performance awards and other tips.

Just Three Weeks Left!
There are less than three weeks left until the “22nd Annual NASPP Conference” and the hotel is close to selling out.  The Conference will be held from September 29 – October 2 in Las Vegas.  Don’t miss this landmark event—view the full agenda and register today.

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


– Barbara