The NASPP Blog

Monthly Archives: May 2017

May 31, 2017

Scenes from San Diego

Last Wednesday, Elizabeth Dodge of Equity Plan Solutions and I presented to the San Diego NASPP chapter. Here are a few pics from the meeting. More pics on the NASPP’s Facebook page.

DSC02805Chapter president James Tozer of E*TRADE Financial and Lynn Goldacker of NuVasive wait to check in the meeting attendees. Kudos to James and the rest of the chapter board for hosting a fantastic meeting.

James is also the NASPP’s Regional Representative for the South and is a member of the NASPP’s Executive Advisory Committee.

DSC02808A few of the early arrivals. The early-bird gets a seat at the table.

DSC02813Board member Claudia Baranowski of Illumina and Theresa Lee of Qualcomm. Thanks to Claudia for making copies of the slide presentation for everyone.

DSC02815Board member Thomas Welk of Cooley (and NASPP Individual Achievement Award recipient and member of the Executive Advisory Committee) chats with Ralph Barry of Compensia. The meeting was held at Cooley’s offices; we appreciate the great meeting space.

DSC02816The folks who got a seat at the table.

DSC02817In the background, a few folks who didn’t get a seat at the table. It was a great turnout for a 7:30 AM meeting. So great, I think the board might schedule a few more breakfast meetings.

– Barbara


May 25, 2017

Check It Out: Standing Room Only at the Nashville NASPP Chapter Meeting

It was standing room only at when I presented to the Nashville chapter this past Tuesday. Here are a few pics from the event:

DSC02802As you can see from this photo, we had a full house for the meeting. Every seat was filled. I heard rumors of it being a record number of attendees. Nashville is one of the newest NASPP chapters and it’s great to see this level of interest from our members in the area.

DSC02794I chatted with Catrice Cooke of Discovery Communications and Tami Phillips of UBS before the meeting.

DSC02795A number of attendees arrived early to catch up with their friends and colleagues before the meeting. It’s always smart to take a little extra time out of your day to make a few connections while you attending your local NASPP chapter meetings.

DSC02797Pictured here is the new chapter president, Tommy Swindle of UBS and board member Ron Marx of Tractor Supply, along with James Hockaday from Brookdale Senior Living. A big thank-you to Tommy, Ron, and the rest of the chapter board for accommodating my travel schedule and hosting a fantastic meeting!

DSC02791There were even a few attendees from out of town.  Melissa Sims and Dennis Lanham of the CEP Institute were in town for a conference and stopped by for the meeting.

– Barbara

May 23, 2017

Excess Tax Withholding: Survey Says…

One of the hottest questions I am hearing these days is whether to allow US employees to request additional federal tax withholding on their restricted stock, RSU, and performance awards. So, last week, we conducted a quick survey to find out what NASPP members are doing. Here are the results, in a nifty infographic:

Can’t see the infographic? View it on a separate web page.

Excess Tax Withholding
Create pie charts

– Barbara

P.S. NASPP members are awesome! We launched this survey on Thursday and by Saturday I had enough responses to close the survey and finalize the results. Thanks to all of you who participated so quickly! You rock! Check out the full survey results.

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May 18, 2017

6 Fun Scenes from the Boston Chapter Meeting

This past Tuesday I presented at the Boston NASPP chapter. Here are a few pics from the meeting (see more pics on the NASPP’s Facebook page).

Mike, Ben, and ArtKudos to chapter president Mike Albert of Fidelity Stock Plan Services and the chapter board for hosting a great meeting in a great location and also for accommodating my travel schedule. Pictured here with Mike is Ben Gibbons and Art Meyers of Choate Hall & Stewart.


catching upAttending chapter meetings is a great way to catch up with your friends in the stock compensation community and to make some new friends (oh, and also to learn stuff).

Tripadvisor HQThe meeting was held at Tripadvisor’s headquarters in Needham, MA, which are pretty spiffy. This might look like a living room, but it’s actually the lobby.

Kevin and YoonA big thank-you to Kevin Kirby of Tripadvisor for arranging for such a fabulous meeting space. Joining Kevin in this picture is Yoon Park of Yoon Park Advisors.

Pamela and HalPamela Murphy of Charles River Laboratories and Hal Lorton of Fidelity chat after my presentation.

sofasThis was possibly the most interesting meeting room I’ve ever presented in. There were comfy sofas, and coffee table, a book shelf filed with travel souvenirs, and even a fireplace (well, technically it was the back of a pizza oven).

– Barbara


May 16, 2017

What’s Going on With the CEO Pay Ratio

The glimmer of hope that the CEO Pay Ratio will be delayed or repealed continues to dim (although it hasn’t been completely snuffed out yet).

The SEC Delay

The comment letters submitted to the SEC about delaying the effective date were overwhelmingly opposed, although most were form letters and not nearly as many were received as on the proposed regs. More importantly, the SEC may not currently have enough commissioners to effect a delay. Although a new chair has been appointed, in his recent Equity Expert Podcast with us, Steve Seelig of Willis Towers Watson explains that three commissioners are needed for a quorum. The SEC currently has only three total commissioners (including the chair); a commissioner could prevent a matter from being voted on just by not showing up for the vote. One of the current commissioners is a Democrat (and even worked with Senator Dodd at one point) and may not be supportive of a delay.

Steve noted, however, that even if a delay can’t be effected, the SEC staff could issue interpretive relief that would make it easier to calculate the ratio). Steve had a lot of insightful things to say about the ratio; the podcast is definitely worth a listen.

The Financial Choice Act

The Financial Choice Act has already passed through the House Financial Services Committee, only a month after it was introduced by Jeb Hensarling (R-TX). This act would dismantle or weaken many provisions of the Dodd-Frank Act, including a full repeal of the CEO Pay Ratio. But even with the quick passage through committee, this act has a ways to go and the odds of it passing are still low.

The bill is close to 600 pages long and does a whole host of other things besides repealing the CEO pay ratio; a memo from Cooley, “It’s baaaack — the Financial CHOICE Act of 2017,” provides a rundown of the scope of the bill.

– Barbara

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May 11, 2017

Catching Up

For today’s blog entry I have a couple of recent developments that don’t really warrant a blog entry of their own.

T+2: It’s Happening

The SEC has adopted an amendment to the Settlement Cycle Rule (Rule 15c6-1(a) of the Exchange Act) to move to T+2. The new settlement cycle will commence on September 5 (the day after Labor Day). I already blogged about this—twice—so I don’t really have any more to say on the topic (see “T+2: What’s It to You” and “Progress Towards T+2“). We hosted a great webcast on it in April (“Be Prepared for T+2“); if you aren’t up to date on this development, be sure to check it out.

FASB Issues Modification Accounting ASU

Yesterday the FASB issued ASU 2017-09 (not to be confused with ASU 2016-09—right, no one is going to get these confused), which redefines when modification accounting is required under ASC 718.

All companies have to adopt the ASU by their first fiscal year beginning after December 15, 2017. Early adoption is permitted. Once adopted the ASU applies prospectively. Unlike with ASU 2016-09, if ASU 2017-09 (yep, not confusing at all) is adopted in an interim period, prior interim periods in the same year are not adjusted.

For more information on the ASU, see my blog entry “FASB Votes on Modification Accounting ASU“).

– Barbara


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May 9, 2017

Scenes from the Dallas Chapter Round-up

Last Friday I attended the NASPP Dallas Chapter’s 5th Annual Southwest Roundup and Equity Compensation Workshop. It was my first time attending this event, so I took a few pictures for the blog and the NASPP’s Facebook page.

OfficersIt was a great event with lots of informative presentations throughout the day. Kudos to the entire chapter board for putting together such a fantastic program. Pictured here are board members Stacey Langley of Spirit Realty Capital, J.D. Ivy of Alvarez & Marsal, and Patricia Fuentes of Merrill Lynch, along with president Fred Constantinesco (aka Freddy C.).

keynoteThe keynote for the day was presented by Hector Picard of Don’ Hector has many impressive accomplishments, including completing multiple Ironman triathlons. He also lost both of his arms in a work-related accident (before the triathlons) and now devotes his life to helping and inspiring others. The Dallas chapter meeting was a stop on his “Tour to Inspire.”

AonThe Aon team came prepared for Cinco de Mayo (the event was held on May 5) with a full mariachi band of rubber ducks. See a close-up of the ducks on the NASPP’s Facebook page.

In this picture: Patrick Gabel, Stephen Popowsk, Wesley Parker, and Dan Coleman of Aon. Also in the pic is Rebecca Kargl of Concho Resources. (Rebecca doesn’t work for Aon, but she was chatting with the team when I happened by with my camera.)

SOSRyan Moore of Stock & Options Solutions has an exciting array of giveaways for attendees to take home, all artistically arranged on his table.

receptionThe day concluded with a reception featuring, what else on Cinco de Mayo—margaritas! In this pic, Brittaney Reese of Gamestop, Janet Clements of Morgan Stanely, Suzanne Kraemer of Celanese Corporation, and Anton Sardos of Fluor catch up during the reception.

See more pics of the event on the NASPP’s Facebook page.

– Barbara



May 4, 2017

Forecasting and Disclosing Tax Effects

One of the primary ways in which ASU 2016-09 changed stock plan accounting practices is to require that all tax effects be recognized in the income statement. Excess tax savings increase earnings (by reducing tax expense) and tax shortfalls reduce earnings (by increasing tax expense). For some companies, this results in a lot of volatility in earnings, earnings per share, and effective tax rates. It also makes it harder to forecast earnings.

The article “Corporate Earnings Guidance Impacted by New Stock Compensation Rules” by PwC reports that companies are trying to forecast the tax effects of stock awards and make disclosures that explain the volatility resulting from the tax effects.

Earnings Per Share

PwC found that some companies are providing detailed commentary on the impact of ASU 2016-09 on earnings per share. Here is a sample disclosure that PwC found:

“[The Company] anticipates fiscal year 2017 diluted EPS from continuing operations to be in the range of $5.38 to $5.58, which includes an expected benefit of about 25 to 30 cents from the adoption of ASU 2016-09. Excluding the benefit of adopting the updated accounting standard, [The Company] anticipates fiscal year 2017 diluted EPS from continuing operations to be in the range of $5.13 to $5.28.”

Effective Tax Rates

PwC found similar disclosures for effective tax rates. From another company:

“We expect an effective tax rate of 26% – 27.5%, after a projected reduction of 350 – 450 basis points related to the implementation of the new accounting standard for the tax benefit of employee share-base compensation.”

Earnings Guidance

Finally, PwC found some companies that had updated previously disclosed earnings and tax rate forecasts:

“[The Company] now anticipates its effective fiscal year 2017 tax rate to be between 32 percent and 33 percent versus its previous assumption of 30 percent and 31 percent, reflecting a 2-point reduction versus year ago compared to the previously assumed 4-point reduction from adopting ASU 2016-09. The company’s updated assumptions for its fiscal year effective tax rate reflect lower than anticipated exercises of [the Company’s] stock options in the first quarter and the company’s revised outlook for full-year stock option exercises. As noted, the company had previously communicated that the benefit to be realized from the adoption of ASU 2016-09 could vary significantly.”

– Barbara

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May 2, 2017

An Expensive Tax Cut

I have another riddle for you: When does a tax cut result in more tax expense? When you’ve been recording deferred tax assets for years based on a higher tax rate, that’s when.

What the Heck?

As I noted in last week’s blog, the Trump administration has suggested lowering the corporate tax rate to 15% (from 35%). In the long term, that will certainly result in welcome tax savings for corporations. But in the short term, it could result in some unanticipated tax expense, particularly when it comes to stock compensation.

A quick refresher: when companies record expense for nonqualified awards (NQSOs, RSUs, PSAs, etc.) they also record a deferred tax asset (DTA) that anticipates the tax savings the company will ultimately be entitled to for the award. This DTA is based on the company’s current tax rate and reduces the current tax expense reported in the company’s P&L.

For example, let’s say a company records expense of $1,000,000 for nonqualified awards in the current period. The company will also record a DTA of $350,000 ($1,000,000 multiplied by the corporate tax rate of 35%—to keep things simple, ignore any state or local taxes the company might be subject to). Even though the DTA represents a future tax savings, it reduces the tax expense reported in the company’s P&L now.

But if the corporate tax rate is reduced to 15%, the tax savings companies can expect from their awards is also reduced.  In this case, the anticipated savings of $350,000 will be reduced too only $150,000 ($1 million multiplied by 15%).  The company told investors it expected to realize a savings of $350,000 but now it expects to only realize a savings of $150,000.  That $200,000 shortfall will have to be reported as additional tax expense.

What Should You Do?

At this point, nothing. We have a way to go before the administration’s tax proposal becomes a reality. And while I can think of plenty of reasons cutting the corporate tax rate might not be a great idea, having to write off a bunch of DTAs isn’t one of them. Regardless of the DTAs, a lower corporate tax rate will lower taxes for companies.

But it’s good to understand how this works, so that if the proposal does become more likely, you know this is something you’ll need to prepare for.

– Barbara

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