The NASPP Blog

Monthly Archives: January 2016

January 28, 2016

5 Tips for Engaging Stock Plan Participants

If you’re a regular reader of The NASPP Blog, you’ve probably caught wind of my passion for employee engagement and communications. In today’s blog, I’ll explore some important and creative ideas for crafting your stock plan’s communication approach for 2016.

I’m always on the lookout for new ideas and trends in getting the message out to employees. If you’ve got a stock plan, you’ve probably figured out that the stock plan is only as good as your participants think it is, and communicating about the plan is an important factor in determining its success. With so many modern tools and choices at our fingertips, figuring out the best options for communication can feel overwhelming at times. To help with that, I’ve come up with 5 communication ideas for 2016.

Cultivate Plan Champions

Sometimes the task of engaging employees feels extra-large because of the quantity of people involved. If your stock plan participants number in the hundreds or thousands, then you know what I mean. While you definitely want your outreach and education to reach all participants, you may also want to consider investing time and resources into developing a handful (a few or dozens, depending on your stock plan size) of stock plan champions – employees who already ooze engagement and, armed with the right information, could spread the word among their peers in the workplace. Consider some smaller meetings or one-one-one sessions with these champions to educate them and encourage them to spread the word. Some ideal candidates for the role may be those who frequently show up at your door to ask questions, or are vocal about their appreciation for the plan. Studies have long shown that word of mouth in the workplace does have an effect – people trust their friends, including co-workers.

Publish Benchmark Information

A wealth of stock plan information is publicly available, which makes it fairly easy to compare the attributes of your stock plan to those of your industry peers and competitors. You’ll want to gain support and approval from management before taking this step, but evaluating your stock plan compared to other plans and highlighting some of your plan’s unique or attractive features can help employees understand how their stock compensation may compare to the rest of the industry.

Create Videos that Reflect Corporate Culture

Hands down, some of the best stock plan videos I’ve come across have a common thread: they all reflect some element of the company’s unique culture. I recall listening in on a session at our 23rd Annual Conference this past fall where a panelist who works for Facebook talked about a family of foxes that lives on site at their corporate headquarters (the foxes even have their own Facebook page). The company created stock plan videos featuring…you guessed it…a fox, which added a unique factor, oozed creativity, and tied into something special about the company’s culture. Instead of a boiler plate corporate video, think of what may plug in well to your company’s culture and let that inspire a theme for your stock plan videos and communications.

Diverse Populations Need Diverse Communications

There are so many forms of diversity in employee populations, and all of them need to be considered. I keep hearing buzz that addressing the needs of a very diverse group of participants continues to be a hot topic. There are generational issues to consider, including how values, work habits, and communication preferences vary among different generations. Baby boomers are working longer, and there are more and more millennials graduating college and entering the workforce. There are cultural considerations in communicating with participants from multiple geographic and cultural backgrounds. If you haven’t seriously contemplated all of these factors in the past, this is the year to evaluate your stock plan demographics and really dig into which modes, formats, and messaging are going to succeed in engaging employees across the board. Just as with marketing efforts, it may be necessary to “target” select participant groups for different communications in order to ensure the message resonates with the audience and achieves the intended goal of engagement.

“If you can’t measure it, you can’t improve it.” (Peter Drucker)

All of the above steps are virtually pointless if you don’t measure their impact on employee engagement. Communicating is not about throwing information out to the universe and hoping it sticks. If you haven’t been steadily measuring your communication strategies and efforts, make it a goal for 2016. There are many ways to measure – I’ll share a few here:

  • Conduct an employee engagement survey (keep the questions and survey on the shorter side – the longer it is, the less likely employees are to remain engaged long enough to complete it).
  • Track email click rates (How many people opened the email? Did people click on links in the emails?)
  • See if you can gather data from your IT department on employee technology behaviors (How many employees use email? Which social media sites are most popular?)
  • Consider allowing participants to rate content. This will give feedback on what is most useful and engaging from their perspective.



I said 5 tips, but I couldn’t resist a 6th: Be discerning with your content. Set a high standard for the content you put out to participants. Chances are, they are already inundated with messages from a variety of sources on many topics. Being consistent in putting out high quality content builds trust – participants begin to realize that any information coming from you is worth their attention.

Remember, whatever you do – be prepared to measure, measure, measure it!

You don’t need to do a complete overhaul all at once – focusing on one or two key areas can make a difference. Now’s the time to set your communication goals for 2016.


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January 27, 2016

NASPP To Do List

ESPP Survey
Participate in the 2016 ESPP Survey (a joint project of the NASPP, the NCEO, and the CEP Institute). Complete the survey by January 29 and you’ll be eligible to win a $100 gift card. Issuers only. Register for the survey today.

Podcast with Alan Dye
Listen to our newest podcast featuring an interview with Alan Dye and hear his thoughts on the future of Section 16.

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


January 26, 2016

Cost-Basis: Five Things Your Employees Need to Know

In just a couple of weeks, employees will begin receiving Forms 1099-B for sales they conducted in 2015.  Here are five things they need to know about Form 1099-B:

  1. What Is Form 1099-B?  Anytime someone sells stock through a broker, the broker is required to issue a Form 1099-B reporting the sale. This form is provided to both the seller and the IRS.  It reports the net proceeds on the sale, and in some cases, the cost basis of the shares sold. The seller uses this information to report the sale on his/her tax return. [Same-day sale exercises can be an exception. Rev. Proc. 2002-50 allows brokers to skip issuing a Form 1099-B for same-day sales if certain conditions are met. But your employees don’t need to know about this exception unless your broker isn’t issuing a Form 1099-B in reliance on the Rev. Proc.]
  2. The Cost Basis Reported on Form 1099-B May Be Too Low. For shares that employees acquire through your ESPP or by exercising a stock option, the cost basis indicated on the Form 1099-B reporting the sale is likely to be too low.
  3. Sometimes Form 1099-B Won’t Include a Cost Basis.  If employees sold stock that was acquired under a restricted stock or unit award, or if they acquired it before January 1, 2011, the Form 1099-B usually won’t include the cost basis (although procedures may vary, so check with your brokers on this).
  4. What To Do If the Cost Basis Is Incorrect (or Missing).  If the cost basis is incorrect, employees will need to report an adjustment to their gain (or loss) on Form 8949 when they prepare their tax returns. If the basis is missing, they’ll use Form 8949 to report the correct basis.
  5. An Incorrect Cost Basis Is Likely to Result in Employees Overpaying Their Taxes. It is very important that employees know the correct basis of any shares they sold.  They will subtract the cost basis from their net sale proceeds to determine their taxable capital gain (or deductible capital loss) for the sale. Reporting a cost basis that is too low on their tax return could cause them to pay more tax than necessary. In some cases, this doubles their tax liability.  The only person who wins in this scenario is Uncle Sam; your employees lose and you lose, because no one appreciates the portion of their compensation that they have to pay over to the IRS.  Your stock compensation program is a significant investment for your company; don’t devalue the program by letting employees overpay their taxes.

Employees should review any Forms 1099-B they receive carefully to verify that the cost basis indicated is the correct basis. If it is missing or incorrect, they should use Form 8949 to report the correct basis.

Check out the NASPP’s new sample employee email “Five Things You Need to Know About Form 1099-B.”  Also, check out these other handy resources in the NASPP’s Cost Basis Portal and use them to develop your own educational materials:

The Portal also has examples and flow charts, all of which have been updated for the 2015 tax forms. [In case you are wondering, there were no significant changes to Form 1099-B, Form 8949, or Schedule D in 2015.]

– Barbara

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January 20, 2016

NASPP To Do List

ESPP Survey
Participate in the 2016 ESPP Survey (a joint project of the NASPP, the NCEO, and the CEP Institute). Complete the survey by January 29 and you’ll be eligible to win a $100 gift card. Issuers only. Register for the survey today.

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


January 19, 2016

Update to ASC 718: Early Adoption

For my last installment (at least for the moment—expect another blog when the FASB officially adopts the new standard) in my series on the FASB’s ASC 718 simplification project, I answer a few questions relating to early adoption of the new standard.

Can companies adopt it early?

Yes, companies can adopt the amended standard in any interim or annual period after the FASB approves the official amendment. If the FASB approves the amendment as expected in this quarter, companies could adopt it in this quarter.

Can companies adopt it now?

No, not quite yet. Companies have to wait until the final amendment is approved by the FASB to adopt it.

Can companies adopt just the parts of the update they like early and wait to adopt the rest of it?

Heck no! This isn’t a salad bar; it’s all or nothing. You have to take the bad with the good.

If we start allowing employees to use shares to cover tax payments in excess of the minimum required withholding now, are my auditors really going to make me use liability accounting, given that we all know the rules are changing soon?

Well, I can’t really speak for your auditors, so you’d have to ask them—accounting-types do tend to be sticklers for the rules, however. If the FASB approves the amendment on time, you could adopt it this quarter and there’d be no question about liability treatment. But you’d have to adopt the whole standard, including the tax accounting provisions, so you would want to make sure you are prepared to do that.

If you don’t want to adopt the entire update as soon as the FASB approves it, liability treatment applies if shares are withheld for more than the minimum tax payment. For awards that are still outstanding when you adopt the update, this liability treatment will go away. You’ll record a cumulative adjustment at the time of adoption (see my blog last week on the transition) to switch over to equity treatment. But for the awards that are settled prior to when you adopt the standard, you won’t reverse the expense you recognize as a result of the liability treatment.

If the awards that will settle between now and when you expect to adopt the standard are few enough, the expense resulting from the liability treatment might be immaterial. Likewise, if your stock price is at or below the FMV back when the awards were granted, you might not be concerned about liability treatment because it likely wouldn’t result in any additional expense.

Note, however, that if you establish a pattern of allowing share withholding for excess tax payments, liability treatment applies to all awards, not just those for which you allow excess withholding. You could have liability treatment for all award settlements that occur before you adopt the amended standard.

– Barbara

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January 18, 2016

NASPP Chapter Meetings

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

Silicon Valley: Christina Hall of LinkedIn and Jon Doyle of International Law Solutions present “Equity Compensation for a Global Workforce.” (Tuesday, January 19, 11:30 AM)

Chicago: Jeffrey Keckley and Matthew Wolfson of Meridian Compensation Partners present “2016 Executive Compensation Considerations: Highlights from Meridian’s Latest Corporate Governance and Incentive Design Survey.” (Wednesday, January 20, 7:30 AM)

DC/VA/MD: Andrew Gewirtz and Robert Delgado of KPMG present “Section 409A: Trips, Traps, & Pitfalls to Avoid.” The presentation will be followed by the chapter’s annual holiday event, including hors d’oeuvres, wine, games and prizes! (Thursday, January 21, 3:30 PM)

San Francisco: Michael Chang of The Core Group presents “Equity Incentive Plans in Asia – Regulatory Strategies for Successful Implementation” and Laura Lakin McDaniels of Cooley presents “A New Year, a New Proxy Season, a New You!” (Thursday, January 21, 11:30 AM)



January 15, 2016

“Inadvertent” is No Excuse for Untimely Section 16 Filings

It’s been a while since I tackled Section 16 reporting in this blog. The last time I covered it, the SEC was on widespread mission to crack down on the smallest of infractions, Section 16(a) included. That was in 2014, and things seem to have quieted since then. Or have they? In today’s blog I’ll address that question.

All is (not) Quiet on the Section 16 Front

This time last year, there was a fair amount of buzz circulating around about the SEC’s (at the time) newfound aggression in pursuing enforcement for Section 16(a) reporting violations. It was the latest in a line of actions brought by the Commission as part of what SEC Chairman White had described as a “broken windows” initiative, where the agency put focus on frequently overlooked minor violations and highlighted that it was “important to pursue even the smallest infractions.”

While some companies have struggled to file Section 16 reports on a timely basis, the SEC’s ability to identify even the smallest of those infractions has increased greatly in recent years. Advances in technology and renewed attention to enforcement have combined to create an environment where it’s no longer safe to assume that a tiny infraction, even if just an oversight, will be overlooked. Although hype around this type of enforcement has quieted in recent months, it doesn’t mean that SEC attention has waned. Companies should be attentive in pursuing flawless (or near flawless) compliance with Section 16 reporting requirements.

Proxy season is on the horizon for many companies, and although any Section 16(a) reporting violations that happened in the past are what they are, there’s still time to focus on the Item 405 proxy disclosure piece that identifies any late reported Section 16 activity. Effort can also be made to ensure no Section 16 reporting mishaps occur going forward. It’s time to examine opportunities for improvement in these areas.

Inadvertent Mistakes Aren’t a Defense

There was a time where it almost seemed reasonable to say “it was just an inadvertent mistake.” That language appears in the Item 405 disclosure of many proxy statements. Why? Because, the truth is that inadvertent mistakes do happen. What is important to know is that violations of Section 16(a) reporting requirements are enforced only by the SEC, and (key to note) there is no “intent” or other “state of mind requirement” for there to be a “violation”; therefore, inadvertent failures to timely file Section 16 Forms 3, 4 and 5 may constitute violations of the federal reporting requirements. Essentially, nobody had to have “intended” to violate Section 16 in order for there to be an infraction. Additionally, relying on others is not a defense either: (“The insider didn’t give us timely information and therefore, I couldn’t make the filing on time.”)

Since an inadvertent mistake won’t necessarily absolve an issuer (or an insider) from responsibility and potential SEC enforcement action, it’s more important than ever to develop practices that prevent mistakes from occurring in the first place.

Must-Have Section 16 Resources

This month, Section 16 is getting a lot of NASPP coverage. With the goal to achieve “flawless” reporting this year, there’s lots to focus on, especially if you have a history of recent Item 405 disclosures in the proxy (pointing to opportunities for improvement in this area).

On January 27, Alan Dye will be doing his annual webcast on the Latest Section 16 Developments (free for NASPP members). Since the SEC’s major Section 16 enforcement initiative in late 2014, involving 28 insiders and civil penalties totaling $2.6 million, Section 16 filings have been in the spotlight like never before, commencing a new era of enforcement for the SEC. This is a Q&A webcast, designed to make sure you are equipped to comply. Hear practical tips on refining your Section 16 procedures and answers to your questions on the challenges you are facing today (submit your questions to

We’ve also got a great interview with Alan Dye that will be featured in the next episode of our Equity Expert podcast series (out next week). Be sure to subscribe today so that you are notified when Alan’s interview becomes available. The podcast is all audio, and is accessible on the NASPP website or through a podcast app on your mobile device (search for “Equity Expert”). The podcast is available for free to everyone. If you’re not listening to it, you’re missing out on some great interviews!

The Jan-Feb issue of The NASPP Advisor is due out next week, and both the Top 10 List and Administrators’ Corner articles are dedicated to Section 16 practices. Keep an eye out for it, because you won’t want to miss the tips and practices for achieving better compliance with Section 16 reporting requirements.

Watch for and take advantage of these great resources to help improve Section 16 compliance and reporting practices this year.


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January 13, 2016

NASPP To Do List

ESPP Survey
Participate in the 2016 ESPP Survey (a joint project of the NASPP, the NCEO, and the CEP Institute).  Complete the survey by January 29 and you’ll be eligible to win a $100 gift card.  Issuers only.  Register for the survey today.

New Podcasts
We have started the year of with several new podcasts:

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


January 12, 2016

Update to ASC 718: What’s Next?

For today’s installment in my series on the FASB’s ASC 718 simplification project, I explain what the next steps are in this process.

Is the update final now?

Not quite yet. For the most part, we know what the final update is going to look like because the FASB’s decisions with respect to each issue in the exposure draft are public.  But the FASB staff still has to draft the actual amendment to ASC 718 and the FASB has to vote to adopt the amendment.

In addition, there are a few technical details in the exposure draft that were commented on and that we expect the staff to clean up, but we won’t know for sure until the amendment is issued.  The FASB didn’t vote on these details because they don’t change the board’s overall position; it is merely a matter of clarifying what the board’s decision means with respect to some aspects of practical implementation.  For example, the language of the proposed amendment relating to share withholding seemed to imply something different than the FASB’s explanation of what this change would be. I am assuming the staff will modify this language but we won’t know for sure until the final amendment is issued.

When will the FASB adopt the amendment?

According to the FASB’s Technical Agenda, this project is expected to be finalized in Q1 2016. Anyone who’s been in the industry for a more than a couple years knows, however, that these things tend to slip a bit. In my 20 years in this industry, I can’t think of a single regulation, rule, amendment, etc. that, when targeted for issuance during a specific time frame, came out earlier than the very last week or so in that time frame.  (10 pts to anyone who can prove me wrong on this—I started in the industry in 1994, so stuff before that doesn’t count.)  The FASB is no exception, so I’m guessing that we are looking at the end of March or maybe even Q2 2016.

When will companies be required to comply with the new guidance?

Public companies will have to adopt the update by their first fiscal year beginning after December 15, 2016 (and in the interim periods for that year). Private companies have a year longer to adopt for their annual period and two years longer for interim periods.

Will the standard now be called ASC 718(R)?

No.  For people like me who write about accounting, that would be handy because it would make it easy to distinguish when I’m talking about the pre-amendment vs. the post-amendment ASC 718.  Now I’ll have to use some sort of unwieldy clarification, like “ASC 718, as amended in 2016.”  But under the FASB’s codification system, the existing standard is simply updated to incorporate the amendments.  The name of the standard will stay the same.

If the Codification system didn’t exist, maybe we would call it FAS 123(R)(R). Or would it be FAS 123(R)2?

– Barbara

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January 11, 2016

NASPP Chapter Meetings

The first NASPP chapter meetings of 2016:

Connecticut: Brian Burke of TD Ameritrade, Andrew Gewirtz of KPMG, and Andrea Kagan of Solium present “Tax Compliance and the W-8.” (Tuesday, January 12, 10:00 AM)

Carolinas: The chapter hosts meetings/socials in both Charlotte and Raleigh.  The meetings will be relatively informal, with updates from last year’s NASPP Conference, upcoming meeting dates, and an expert providing topical updates at each location. In Charlotte, Taylor French from McGuireWoods will address legal hot topics, while Amanda Newby of Red Hat will lead a broad-based discussion including ISS Equity Plan Scorecards in Raleigh.  (In Charlotte on Wednesday, January 13, 4:30 PM. In Raleigh on Thursday, January 14, 4:30 PM.)

Philadelphia: Erin Bass-Goldberg and Jarret Sues of Frederic W. Cook & Co. present “CEO Pay Ratio: Now What? .” (Thursday, January 14, 8:30 AM)