EMPLOYMENT (EXECUTIVE COMPENSATION)

Employment (Executive Compensation)

Consultation regarding executive compensation, such as Incentive stock options, non-qualified deferred compensation plans and arrangements, non-statutory stock options.

Consultation regarding the design and implementation of a detailed executive compensation program, within the average range of similarly-situated companies in the same industry.

Advised on executive and board-based compensation plans and programs and related corporate governance matters, including with respect to mergers and acquisitions.

Assisted with the preparation of materials related to meetings of the Board of Directors and its committees, including the Compensation Committee.

Prepared compensation disclosure items such as the Compensation Discussion and Analysis (CD&A) narrative for annual proxy statements.

Executive compensation as related to mergers and acquisitions (M&A) transactions of both public and private companies, including advising clients on potential executive compensation issues involved in the transaction, drafting and reviewing employee-related sections of purchase agreements, due diligence, and negotiating with executive compensation lawyers.

Executive compensation as related to initial public offerings (IPOs), including advising on executive compensation matters – such as IRC Section 162(m) of the Internal Revenue Code (IRC) and Section 16 of the Exchange Act – assisting in the drafting of the executive compensation section of securities filings, corporate governance related to executive compensation issues, and drafting new equity compensation plans and annual bonus plans.

Provided ongoing counsel relating to executive compensation following an IPO.

Negotiated and drafted various executive compensation-related agreements and documents, such as compensation plans, employment agreements, offer letters and separation agreements.

Assisted in the design and implementation of deferred compensation, change in control and equity compensation arrangements.

Analyzed and advised on various Internal Revenue Code sections, including 83, 162(m), 280G, 409A, 457A, in consultation with tax attorney subject matter experts (SMEs).

Familiarity with executive compensation and benefit matters that may arise in M&A transactions, such as negotiating key terms of acquisition agreements, developing executive succession arrangements and implementing new compensation and benefit plans, individual employment and severance agreements.

Related litigations involving employment, employee benefits and ERISA issues, including in class action lawsuits that may be related to securities and shareholder derivative cases, employee non-compete and non-solicitation agreements, theft of trade secrets, modifications of employee retirement and benefits agreements and whistleblower claims.

Assisted in preparing executive compensation disclosures in the annual proxy statement, including the CD&A, tables and any management compensation proposals, such as say‑on‑pay and approval of new equity compensation plans.

Consultation regarding investor relations, including the management of relations with corporate governance advisors such as Institutional Shareholder Services (ISS) and Glass Lewis & Co. (Glass Lewis).

Focus on Dodd-Frank issues related to corporate governance and executive compensation when drafting the Compensation Discussion and Analysis (CD&A) section of the proxy, such as a shareholder advisory vote on pay practices (“say-on-pay”), shareholder advisory vote on golden parachutes, independence requirements for compensation committee members, rules regarding use of consultants by the compensation committee, disclosure of the ratio between C-Suite pay and the median employee pay, disclosure of the relationship between pay and performance, executive compensation clawback policies in the case of restatements, disclosure of hedging policies covering employees, officers, and directors.

Issues for consideration may include whether the CD&A adequately explains the company pay practices, how to learn from a say-on-pay vote that produced unexpected results by engaging investors, or if the results of previous say-on-pay vote put the reelection of any directors at risk.

An effective CD&A may include an executive summary highlighting the compensation committee’s positions regarding changes to the executive compensation package, executive pay and any compensation issues that might be considered controversial to objective outsiders, and should attempt to explain why the compensation committee justifies such positions, the use of informational graphic elements such as graphs and tables that may help moderately-knowledgeable readers understand the information, and full disclosure of key executive compensation practices (such as tying pay to performance) and highlighting the lack of potentially-controversial pay features or perks (such as tax gross-ups on perquisites or personal use of corporate aircraft and luxury vehicles).

Analysis of the recommendations made by proxy advisor firms such as Glass Lewis and ISS, regarding investor voting on previous substantially-equivalent executive compensation issues and by recommending that directors engage directly with such firms and investors.

Consultation regarding SEC Regulation Fair Disclosure (FD) issues.

Consultation regarding change-in-control (CIC) provisions in an executive compensation agreements, in which the executive compensation is automatically increased or accelerated in connection with a sale or other CIC of the company, which may be either a single-trigger agreement (based solely on the occurrence of the CIC itself) or a double-trigger agreement (when there is both a CIC and the executive in question separates from the company).

CIC provisions are generally included in executive compensation agreements, so they are effectively voted on as part of the say-on-pay vote, and so they become an issue in M&A situations, where the acquirer must decide whether to accept such a precondition, and such CIC provisions must be disclosed prior to any shareholder vote, which is advisory only but may result in resentment by the acquirer and its shareholders, causing reputational risks for any remaining directors of the target who originally voted for such provisions.

Assisted with the design, administration, and governance of compensation, benefits, and severance for directors, executive officers, and other senior managers and employees.

Typical tasks, such as annual and long-term cash incentive plans, deferred compensation plans, employee stock purchase plans, equity compensation plans and awards, executive employment and severance agreements, supplemental retirement plans.

Consultation regarding the implications of disclosing of executive compensation committee decisions under U.S. securities laws, and recommendations on drafting required disclosures in the annual proxy statement.

Consultation on matters related to obtaining shareholder approval of equity compensation plans under New York Stock Exchange (NYSE) and National Association of Securities Dealers Automated Quotations System (NASDAQ) listing rules, including the potential impact of voting policies of proxy advisory firms, such as Glass Lewis and ISS.

Assistance with executive compensation issues in M&A transactions, such as the design and implementation of CIC employment, severance, or other management retention programs, disclosure of executive officer and director interests that might affect shareholder approval, disposition of equity compensation awards of the target company, due diligence (to identify key employment, severance, and equity and incentive compensation arrangements likely to be impacted by the transaction), potential impacts on the equity compensation programs to the purchaser (such as addressing retention of management to facilitate administrative processes and maximize tax efficiency), review for the possibility of any golden parachute excise taxes from any related excess payments, in addition to ordinary income taxes on such excess payments resulting from the transaction.

Attempts to align the interests of the executives with the interests of the employer and its shareholders and stakeholders.

Understanding the executive compensation-related provisions of ERISA and the Internal Revenue Code (IRC), such as IRC Section 409A.

Developed a database of executive compensation best practices, forms, templates and model plans.

Prepared, negotiated and reviewed non-qualified deferred compensation arrangements.

Audited exiting executive plans, including non-qualified deferred compensation, change in control, incentive bonus and supplemental retirement plans.

Consultation regarding alternatives for managing CIC issues and “golden parachutes”.

Advised on public company compensation deduction limits and performance-based compensation.

Assisted in establishing corporate policies to attract and retain key management.

Provided consultation regarding the application of equity and synthetic equity in executive compensation plans.

Assisted employers with sensitive considerations regarding the departure of executives, including critical issues of separation, severance and restrictive covenants.

Drafted, negotiated and reviewed many types of executive compensation plans and agreements, such as CIC, deferred compensation, employee stock purchase, (ESPPs), equity compensation, executive employment, executive healthcare continuation, executive life insurance, executive severance, fringe benefits, long-term and short-term cash incentive, phantom stock, qualified and nonqualified retirement.

Typical compensation issues, such as hybrid rights and other phantom equity structures, employee stock purchase plans (ESPPs), performance shares, restricted stock and restricted stock units, stock appreciation rights (SARs), stock options.

Consultation for performance-based equity compensation in compliance with complex tax requirements, including IRC Sections 162(m) (and IRS Notice 2018-68, which provides guidance on recent 162(m) changes) and 409A, as well as issues raised by performance-based grants and modifications of equity grants.

Experience with corporate-owned life insurance (COLI), secular trusts, rabbi trusts, supplemental executive retirement plans (SERPs), and other executive compensation funding devices.

Due diligence for equity plans, executive plans, health and welfare plans and retirement plans.

Drafting and negotiation of agreements, contracts and documents related to executive compensation and benefits.

Strategic planning regarding how to structure benefits issues post-closing in M&A situations.

Assistance implementing employment agreements, employee equity programs, retention agreements, and other incentive programs in ways to retain the services of key employees during the post-acquisition period, including the tax and accounting implications of subjecting employee equity to indemnity escrows or earn-out arrangements, the application of the “golden parachute” tax rules (IRC Section 280G) to accelerated benefits and severance pay, and the development of various retention arrangements involving employment agreements or special cash or equity grants.

Assisted with designing and implementing severance plans to encourage retention before and after closing.

Consultation for compensation committees of various types of companies, including emerging growth, family-owned, private equity-owned, regarding CIC agreements,employment contracts, equity compensation, incentive programs, and on litigation issues that relate to proxy disclosure and executive compensation.

Legal support for compensation committee meetings, made presentations and conducted training for the Board, and assisted with officer and director compensation reviews.

Key recommendations to Boards regarding how to lessen the probability of activist shareholder lawsuits regarding executive compensation issues, such as reviewing the process for setting director and executive compensation and ensuring strong controls and procedures are in place, reviewing self-serving waiver language in stockholder-approved equity incentive plans attempting to absolve directors from liability for apparently self-dealing executive compensation decisions, presenting the tone of management in a non-aggressive manner, reviewing whistleblower procedures for an easing of apparently retaliatory language, reviewing clawback policies for over-reaching scenarios, confirming transparency and complete disclosure to all directors of all information that may be relevant to calculating executive compensation, consideration of whether large or atypical awards granted to executives who are also controlling stockholders should be treated differently (perhaps to be first approved by an independent compensation review committee and then ratified only by disinterested stockholders, in an attempt to qualify for business judgement review should such awards ever be challenged in court).

Typical provisions included in an executive compensation agreement, such as base salary, confidentiality, deferred compensation, insurance (such as health, life, long-term disability, terrorism, travel accident), short-term incentive pay and bonuses (including the conditions precedent or performance metrics that must be met, and the schedule under which bonuses would be paid), long-term cash-based incentive pay, long-term equity-based compensation (such as restricted stock, stock appreciation rights, stock options), non-competition, non-solicitation, perks and incidental benefits, relocation package, severance package, supplemental executive retirement plan (SERP) considerations, whether the contract terms will automatically renew if there was no termination or whether the executive must be terminated or continue his or her employment on an at-will basis.

Consultation regarding how the Tax Cuts and Jobs Act (TCJA) amended IRC Section 162(m), eliminating the Section 162(m) qualified performance-based compensation exception, so that all compensation paid to covered employees in excess of $1 million annually is not deductible (unless it is grandfathered under the TCJA transition rule), expanding the definition of a “covered employee” to include any individual who served as CEO or CFO during the taxable year (as well as the next three highest-compensated officers for that taxable year), allowing the application of covered employee status for all future taxable years (thus, implicitly requiring companies to keep a running list of their covered employees), and expanding Section 162(m) application to companies with publicly-traded debt and foreign private issuers.

Design, negotiation and drafting of short-term and long-term incentive plans including equity arrangements such as appreciation rights, performance and share plans, profits interest programs, restricted stock and unit plans and stock option plans.

Design, negotiation and drafting executive employment, severance and change-in-control agreements, non-qualified deferred compensation arrangements, compensatory arrangements for privately-held entities.

Consultation regarding SEC disclosures relative to executive compensation and governance, and general knowledge of applicable Federal Securities Laws.

Consultation regarding applicable tax rules, such as IRC Sections 83, 280G, 409A.

Experience with executive compensation issues related to corporate transactions, including planning in the context of capital raising events, joint ventures, M&A and public offerings.

Research, testing, use, recommendation, specification and procurement of various compensation management software platforms, such as Ascentis, BalancedComp, Capshare, CaptivateIQ, Carta Equity Management, CATS, Certent Equity Management, CompAccelerator, CompACT, Compass Cloud, Compease, Compensation Tool, CompensationXL, COMPOSE, Compport, CompTrak, COMPview, Curo, DID, Engagedly, EquatePlus, FairPay Pro, FocalReview, Harvest HCM Compensation, Hibob, HubbubHR, Incentive Compensation Management Solution, Payfactors, PayReview Compensation Management, PayScale, PeopleFluent Compensation Management, Pivot Remuneration, ProCARE Portal, PromptPayPlanner, PTO Exchange, Qgenda, Recognition Intelligence, Salary.com, SimplyMerit, TalentComp, Total Compensation Cloud Solution, UltiPro, Willis Towers Watson Compensation Software.

Last updated 200617_1104