The NASPP Blog

Monthly Archives: December 2015

December 30, 2015

More Haiku

The NASPP Blog is on vacation this week, but to tide you over while we are out, here are some stock plan haiku submitted by Andrew Schwartz of Computershare (in response to last week’s blog entry, “Stock Plan Haiku“):

Like flowing rivers
Cascade myriad tax forms
From stock purchase plans

Avalanche of white
Paper hills bury workers
Total confusion

Proceeds cost basis
Dividend reinvestment
Lot after lot

Search offering dates
Missing fair market values
Take a wild guess now

Go pick a number
Gain or loss it’s all the same
Just add it all up

Forget wash sale loss
Sure looks like a gain to me
File return get beer

The NASPP Blog will return next week.  Happy New Year!

– Barbara

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December 22, 2015

Stock Plan Haiku

A while ago, I read an article about creating successful PowerPoint presentations that included the line “Think haiku, not epic poetry.” I’m not sure I agree entirely with the author’s points about PowerPoint (I’ve sat through a lot of PowerPoint presentations that adhered to the “six to eight words per slide” rule that, frankly, were all marketing fluff and no substance), but it did get me thinking.  Could employees be educated about stock compensation in a haiku?

So, for something a little lighter this holiday season, I offer some examples of stock compensation education in the form of haiku:

Please don’t wait until
The very last minute to
Exercise options.

No shares in account
You sold them; now they are gone.
Shhh—you can buy more.

Cost basis on your
1099-B is wrong.
Don’t overpay tax.

Please retain this form
You will need it at tax time.
Lose it–be sorry.

ESPPs are
The best thing since sliced bread
Don’t miss enrollment.

Now it’s your turn–email your haiku on stock plan topics to me at

I hope you all have a great holiday season!

– Barbara

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December 17, 2015

Scoring the ISS Scorecard

I think holiday brain is getting to me, because I’m starting to have flashbacks. I remember this time last year the stock plan world was buzzing about ISS’s “new” Equity Plan Scorecard, intended to revamp the way ISS analyzes stock plan proxy proposals. Fast forward to now: we’ve got a full season of proxy reporting behind us and are gearing up towards the next one (see the NASPP Blog: “ISS Scorecard: What’s New for 2016?“). While preparing for this year’s season, it may be helpful to look back at this past year and see how the scorecard really impacted stock plan proposals.

2015 Scorecard Post Mortem

In a recent memo, “The New Equity Plan Approval Landscape: A Post Mortem on the 2015 Proxy Season,” consulting firm Towers Watson looked back on the voting results of stock plan proposals brought to shareholders of S&P 1500 companies. A key question in evaluating the data was how did the proposals fare in light of the new scorecard? (remember, it was first used this year.) Did more proposals fail to get a passing vote? Let’s see how the the scorecard scored when looking at the overall outcome of stock plan proposals.

According to Towers Watson, the average shareholder support in equity plan votes actually rose, even if just slightly (up to 90% in 2015 from 87% in 2014). Only one company failed in its quest to gain shareholder support for an equity plan proposal. This outcome showed a decrease in failure rate (only 0.03% this year compared to 0.9% in 2014).

The Verdict on the Scorecard?

While it’s hard to attribute the above changes to any one variable, it’s probably safe to say that the scorecard didn’t hurt equity plan outcomes. It may have even helped, because it gave flexibility to companies to structure their practices and plans such that they could lose a few points here and gain a few points there, having a better idea about the impact those decisions would have on the scorecard results.  It wasn’t like a steep test with a high curve that makes it nearly impossible to succeed. For the most (emphasis on most) part, companies came through unscathed. While the flexibility of the scorecard may have contributed to that success, even Towers Watson points to the fact that this could also be attributed to factors such as improved Compensation Discussion and Analysis and Say-on-Pay. From their memo:

This modest increase in favorable outcomes is notable in a year in which ISS updated its methodology, the first major revamp in nearly a decade, and even more so when we consider that the level of negative ISS vote recommendations on equity plans stayed consistent with 2014, at 12%. The 2015 voting outcomes suggest that the EPSC methodology gave companies greater flexibility to structure key equity plan provisions and appropriately size their share requests.

With this added flexibility, however, came greater accountability as companies in our experience devoted much more preparation and analysis time for this year’s equity plan proposals, including more outreach to shareholders to understand individual voting policies and decision points. Additionally and equally as important, many companies took the opportunity to enhance their proxy disclosures to tell a more complete story around the share request. In short, the equity plan proposal enhancements we saw this year somewhat mirror the evolution of the Compensation Discussion and Analysis in recent years as a result of say-on-pay votes.

What’s Next?

While the overall structure of the scorecard is unchanged, there are some other changes for 2016. If you missed the earlier blog from Barbara Baksa on this topic (“ISS Scorecard: What’s New for 2016?“), be sure to check it out.

ISS’s updated FAQ for the 2016 scorecard has also been released.



December 16, 2015

NASPP To Do List

New Studies
We’ve posted two new studies by Frederic W. Cook & Co:

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

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December 15, 2015

5 Things About Global Stock Plans and Technology

This past summer, the NASPP and Solium co-sponsored a quick survey on global stock plan administration. We asked companies about the technological challenges they experience when it comes to administering global stock plans, focusing on 12 primary challenges related to tax compliance, financial reporting, and other administrative matters. Close to 70% of respondents indicated that they struggle with four or more of the challenges identified and several noted that they struggle with nine or more of the challenges.

For today’s blog entry, I highlight five things I learned from the survey:

1. There are still a lot of manual processes out there.

Two-thirds of respondents say they spend too much time on manual processes.  This is a high-risk proposition: it is difficult to implement adequate controls over processes and calculations performed in a spreadsheet. This seems especially concerning given that the SEC is in the process of adopting rules requiring recovery of compensation for all material misstatements, even if due to inadvertent error (see “SEC Proposes Clawback Rules,” July 7, 2015). One incorrect calculation discovered too late could result in recoupment of bonuses and other incentive compensation paid to executive officers.

2. Tax compliance is a top concern for companies.

This really isn’t a surprise—let’s face it, tax laws outside the United States are a hot mess.  Every country does something different. Some countries change their laws every few years (I’m looking at you, Australia and France) and grandfather in old awards.  Some countries have different rules for social insurance taxes vs. income taxes. Add in mobile employees and, well, you have a lot of work for tax lawyers.

3. Regulatory compliance is also a challenge.

56% of respondents cite keeping up with regulatory changes as a top challenge and 45% cite regulatory requirements in other countries.  Regulatory compliance goes beyond tax laws to include things like securities laws, data privacy (a hot topic these days, see “Data Privacy Upheaval,” December 3, 2015), labor laws, currency restrictions and a host of other issues. It’s hard to stay on top of it all.

4. It’s the participants that suffer.

Ultimately, in the struggle to administer a global stock plan, something has to give and that something is usually the participant.  Only 50% of respondents offer a qualified plan in countries where they could; the hurdle of regulatory compliance gets in the way. And 75% of respondents said that they would focus more on employee education if they could just spend less time on basic administration.

5. Expectations are low.

When we asked companies what is on their wish list for their administrative system, I was surprised at how low some items ranked (it was a “check all that apply” question, I thought everyone would want just about everything).  For example, despite the fact that 71% of respondents reported tax-compliance for mobile employees as a top challenge, only 64% wanted a system that could calculate tax liabilities for mobile participants.  It left us wondering if companies need to dream bigger for their administrative platforms.

Check out the White Paper and Survey

If you haven’t had a chance to read it yet, check out the white paper on the survey results and download the full results from the Solium website.

– Barbara


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December 10, 2015

Trends in Director Compensation (2015)

Earlier this fall, Frederic W. Cook released the findings of their 2015 Director Compensation study in a report titled “2015 Non-Employee Director Compensation Report”. In today’s blog I share some of the stock compensation related highlights from their report.


The study was conducted with analysis of non-employee director compensation practices at 300 US public companies across a variety of sectors.

One Size Fits All?

In this year’s study, virtually all size categories (small, medium and large-cap) of companies that were studied compensate non-employee directors with primarily stock compensation (meaning more than 50% of director compensation was paid in stock awards and/or stock options). This continues a trend of increasing the equity compensation piece of the compensation pie, which makes sense when you think about aligning director compensation with the shareholder value they are tasked to oversee. Interestingly, while stock compensation ruled the majority when looking at size of company, it didn’t necessarily represent the majority of compensation in each industry sector. The financial services and industrials sectors have yet to pass the 50% mark in issuing equity over cash (cash still is the majority of compensation in those industries).

Stock Awards Continue Their Reign

The dominant equity compensation vehicle is full value stock awards (or units). 85% of the companies in the study use dollar denominated stock awards rather than share numbers. Stock option grants to directors continue to diminish. The technology sector continues to be the heaviest user of stock options to compensate directors, but even that industry is trending down in stock option usage – only 22% of tech companies issued stock options to directors (down from 32% the prior year).

The Trend Continues: Stock Ownership Guidelines

We’ve previously blogged about the continuing uptick in the number of companies adopting share ownership guidelines for executives and directors. The overwhelming majority (96%) of large-cap companies have stock ownership guidelines in place for directors. Small-cap companies continue to catch up in implementing guidelines for directors, with 60% having some form of guideline and/or retention policy in place. The good news is that’s up from just over half of small-cap companies last year. According to the Frederic W. Cook report, “The median ownership requirement is now five times the annual cash board retainer.” 10% of the companies studied have a mandatory hold-until-retirement policy for directors.

The report on this study, along with many other NASPP and outside surveys and studies can be found in the NASPP’s Survey and Studies portal. NASPP and co-sponsored surveys can also be found in the Surveys section of our website.


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December 9, 2015

NASPP To Do List

Quick Survey on Stock Plan Education
The NASPP and Fidelity Stock Plan Services are pleased to announce a joint survey on stock plan education programs. Take this quick survey today to find out how your education program compares to your peers’. The survey includes fewer than 25 questions; you can complete it in less than ten minutes—do it today, before you forget. The deadline to complete the survey is Friday, December 11.

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


December 8, 2015

Update to ASC 718: The FASB’s Decisions, Part 2

This week I provide additional coverage of the decisions the FASB made on the ASC 718 simplification project (see my blog from last week for Part 1).

Cash Flow Statement

The Board affirmed both of the proposals related to the cash flow statement: cash flows related to excess tax benefits will be reported as an operating activity and cash outflow as a result of share withholding will be reported as a financing activity.  Nothing particularly exciting about either of these decisions but, hey, now you know.

Repurchase Features

The board decided not to go forward with the proposal on repurchases that are contingent on an event within the employee’s control.  The proposal would have allowed equity treatment until the event becomes probable of occurring (which would align with the treatment of repurchases where the event is outside the employee’s control).  The Board decided to reconsider this as part of a future project.  The Board noted that this would have required the company to assess whether or not employees are likely to take whatever action would trigger the repurchase obligation, which might not be so simple to figure out (we all know how hard it is to predict/explain employee behavior).

Practical Expedient for Private Companies

The Board affirmed the decision to provide a simplified approach to determining expected term for private companies, but modified it to allow the approach to be used for performance awards with an explicitly stated performance period.  I’m not sure that many private companies are granting performance-based stock options, but the few who are will be relieved about this, I’m sure.

Options Exercisable for an Extended Period After Termination

Companies that provide an extended period to exercise stock options after retirement, disability, death, etc., will be relieved to know that the FASB affirmed its decision to eliminate the requirement that these options should be subject to other applicable GAAP.  This requirement was indefinitely deferred, but now we don’t have to worry about it at all.

– Barbara

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December 7, 2015

NASPP Chapter Meetings

A dozen NASPP chapter meetings in one week—that has to be some kind of record:

Philadelphia: Mona Ghude and Rob Jensen of Drinker Biddle & Reath, Liz Stoudt of Aon Hewitt, and Tami Bohm of Radian present “Equity Award Modifications – Implications and Considerations.” (Monday, December 7, 8:30 AM)

Seattle: Peter Kimball of ISS Corporate Solutions presents “Sweet Sixteen: ISS Policy Updates and the Proxy Season Preview.” (Monday, December 7, 7:30 AM)

DC/VA/MD: Nathan O’Connor and Amit Tekwani of Equity Methods present “2015 Stock Compensation Accounting Best Practices: From Our Survey to You.” (Tuesday, December 8, 4:00 PM)

Nashville: PJ Gabel of Radford and Thierry Vo of UBS present “Show Me the Value, Spare Me the Expense.” (Tuesday, December 8, 7:30 AM)

Sacramento: The chapter hosts a year-end challenges roundtable.  There will be food, drinks, raffles, and prizes! (Tuesday, December 8, 11:00 AM)

San Diego:  The chapter hosts its popular annual social at Rough Draft Brewing Company.  (Tuesday, December 8, 3:00 PM)

KS/MO: The chapter hosts a holiday roundtable luncheon.  The meeting will include highlights from the 2015 NASPP Conference, planning for chapter meetings for 2016, and a discussion of hot topics. (Wednesday, December 9, 11:30 AM)

Las Vegas: The chapter hosts its 2015 holiday meeting and happy hour at Tom’s Urban, along with a tour of the new MGM Las Vegas Arena. Denise Glagau of Baker & McKenzie will present “Get Ready For 2016: Top 10 Legal Developments from 2015 Impacting Equity Awards & Plans in the U.S. and Beyond.” (Wednesday, December 9, 3:30 PM)

Los Angeles: The chapter hosts a holiday networking event with Baker & McKenzie.  Valerie Diamond and Brian Wydajewski present on the latest developments on global equity in 2015 and share a few predictions for 2016.

NY/NJ: Christine Cognetti McCasland of Morgan Stanley and Mike Andresino of Posternak present findings on Rule 10b5-1 plans from a joint NASPP/Morgan Stanley survey.  After the presentation, the chapter hosts a holiday party at Haven Rooftop at the Sanctuary Hotel. (Thursday, December 10, 3:30 PM)

Austin: The chapter hosts its 2nd annual Austin NASPP Holiday Social & Networking Event in a private suite at the Texas Stars hockey game. (Friday, December 11, 7:00 PM)

Connecticut: Sharon Podstupka and Aalap Shah of Pearl Meyer present “Executive Compensation & Communication: Striking the Balance.”  The meeting will conclude with a holiday lunch and door prizes! (Friday, December 11, 9:00 AM)

And since there’s only chapter meeting scheduled for next week, I’m just going to mention it now:

Atlanta: The chapter is hosting its first annual holiday event at Maggiano’s at Perimeter Mall.  There will be cocktails,  light hors d’oeuvres, and lots of networking. (Wednesday, December 16, 4:00 PM)


December 3, 2015

Data Privacy Upheaval

If you are a company with employees in the European Union (EU) or European Economic Area (EEA), you’ve likely long been aware of the stringent data privacy requirements surrounding the transmission and protection of data for those residing in that region of the world. To facilitate compliance with certain aspects of data privacy requirements, some companies relied (in all or part) upon the EU-US Safe Harbor Privacy Program (“Safe Harbor program”), which allowed for transfers of personal data for EU/EEA residents to US companies registered under the program.  On October 6, 2015, the European Court of Justice ruled the Safe Harbor program invalid. What is the impact of this ruling on data transfers relative to stock plans? I’ll explore this question today’s blog.

Much of the information I have on this topic comes from two Baker & McKenzie sources (“New Data Privacy Turmoil?” and “Impact of CJEU US/EU Safe Harbor Program Judgment on Equity Plans“) – both available in the NASPP’s Global Stock Plans portal. Let’s now get to the heart of the matter.

How Would This Potentially Affect Stock Plans?

If your company is a US based company, it’s likely that most or all of your stock plan data is housed in the US. This means that if your plan includes participants in the EU/EEA, their data needs to be sent to the US to be recorded and maintained in the stock plan recordkeeping system. That recordkeeping system could be maintained in-house, or externally via a third party, who also likely maintains data within the US. Additionally, there may be a need to transfer participant data to other third parties who support the company’s stock plans beyond recordkeeping services.

According to the Baker & McKenzie client alert,

“The impact of the ruling on the personal data collection /processing / transfer activities of US multinationals in the context of offering of equity compensation programs to European employees depends upon whether the company had relied on Safe Harbor in this context – or, instead, relied on  an alternative method for managing data privacy considerations (e.g., relying on express consent obtained from participants, either through acceptance  of its equity award agreements or provided as part of the local new hire on-boarding process). If alternative methods have been relied upon, the ruling is unlikely to have any impact on the equity program. If the company relied on Safe Harbor, it will likely need to start relying on an  alternative method.”

The transfer of data provided to brokers is unaffected by this ruling, because financial institutions were never eligible to register under the Safe Harbor program, and as a result, it was never possible to rely on that program to transfer employee data to a broker. Companies had to find an alternate, permissible means of transferring data to brokers. Considering the now-invalidated Safe Harbor program, that is good news for data transfers to brokers or financial institutions, because they were never covered under the program and should remain unaffected by the ruling.

Is Our Stock Plan Affected?

If you have no stock plan participants in the EU/EEA, then this ruling does not affect your stock plans. This only applies to the data of those residing in that region of the world.

For companies that do have stock plan participants in the EU/EEA, the answer to that question is “it depends.” It depends on how the company was complying with data transfer requirements prior to the ruling, as described above. If your company relied on the Safe Harbor program in any capacity, then an alternate method for transferring that data will need to be used.

If your company has no participants in the EU/EEA, but decides to offer equity in that region in the future, it’s important to know that the Safe Harbor program will not be available as a means of compliance with data transfer requirements.

What’s Next?

This ruling has created a wave of turmoil, and not just for equity plans. It’s likely other company functions such as Human Resources are impacted, too. Baker & McKenzie’s suggestion is that “Companies should review their practices with regard to data privacy, including in the context of operating their equity compensation programs. Even if the ruling does not have any direct impact on the equity program, data privacy requirements around the  globe are tightening and a regular review of your company’s approach to data privacy is highly recommended.”

There is also talk of a Safe Harbor 2.0, with no telling on a timeline or potential for success of such an initiative. It’s important that companies recognize the implication of this ruling beyond the immediate affect on employee data transfers. The action of invalidating the entire EU/US Safe Harbor program seems to suggest that the EU has broader concerns about the US’s ability to protect the data of their residents, and it’s possible that other methods of complying with data transfers may follow in being evaluated for efficacy of protecting privacy. Expect the topic of data privacy to be a hot one for 2016.

Speaking of global hot topics, you can find out “5 Things I Learned About Global Compliance and Communication,” in the latest episode of our popular Equity Expert podcast series.



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