By Karim Ali on On Wednesday, June 10, Secretary of the Treasury, Timothy Geithner outlined the Obama administration’s new proposals on executive compensation. The proposals focused on greater independence of corporate compensation committees and giving shareholders a nonbinding vote on executive compensation, commonly known as ‘say on pay’ provisions. Geithner outlined five guiding principals for executive compensation, namely: compensation … Continue Reading
By Porter Wright on Grant Thornton has a relatively recent (February 2009) survey on its website regarding executive compensation that reports 50% of companies surveyed are freezing executive base salaries for 2009 and 15% are reducing salaries. 227 companies responded to the survey, of which the “typical” company seems to be publicly traded with revenues below $100 million and … Continue Reading
By Porter Wright on Yesterday, President Obama announced that the Treasury had adopted new guidelines for financial institutions that are receiving government assistance. The Treasury press release discusses these new restrictions.… Continue Reading
By Porter Wright on According to RiskMetrics, the Laborers’ International Union of North America and the International Brotherhood of Teamsters don’t think Treasury’s bailout program does enough to curb executive compensation. The unions want a number of reforms, including: Incentive compensation not to exceed one times annual salary; Stock option awards tied to increased company performance relative to a … Continue Reading
By Greg Daugherty on The IRS issued Revenue Ruling 2008-13 to clarify what constitutes “performance-based” compensation under Internal Revenue Code Section 162(m). This classification is important because Code Section 162(m) generally prohibits public companies from deducting compensation in excess of $1 million to the CEO and certain named executive officers. If the compensation is performance-based, however, this deduction limitation … Continue Reading
By Porter Wright on Last week the House of Representatives Committee on Oversight and Government Reform rescheduled a hearing on CEO termination payments in connection with the mortgage lending crisis. In January, Committee Chairman Henry Waxman sent letters to Citigroup, Merrill Lynch and Countrywide Financial asking them to justify payments to outgoing CEOs despite significant subprime-related losses and decreasing … Continue Reading
By Porter Wright on The SEC has published its observations regarding executive compensation disclosure for the first round of proxy statements that were filed under the new executive compensation rules. In summary, two themes were the focus of the report: The Compensation Discussion and Analysis (CD&A) needs more attention to how and why compensation decisions are made; and Companies … Continue Reading
By Porter Wright on As the SEC continues to review the first round of proxy statements filed last spring under the new executive compensation rules, publicly traded companies should consider thinking about how to improve disclosures for next year. The importance of analyzing compensation decisions, as opposed to merely stating what types of compensation are paid, is evident by … Continue Reading
By Porter Wright on Earlier this week former Brocade CEO Gregory Reyes was found guilty of all charges in connection with stock option backdating and failing to report such backdating to auditors, regulators, and investors. This is the first conviction of an executive in the government’s option backdating investigation, and it occurred despite the fact Reyes never cashed in … Continue Reading
By Porter Wright on The IRS has issued a directive identifying backdated stock options as a Tier 1 Compliance Issue. The directive explains the tax implications of backdated options, including the fact that options backdated to produce a “build-in” profit do not qualify as incentive stock options (ISOs). Corporations that intended backdated options to qualify as ISOs may be … Continue Reading
By Porter Wright on The IRS has revised the definition of “covered employee” under Section 162(m) of the Internal Revenue Code. The old definition used to mirror the SEC’s definition of Named Executive Officer (officers for whom compensation must be disclosed), but the SEC’s recent changes to executive compensation disclosure rules caused the two definitions to be out-of-sync. Under … Continue Reading
By Porter Wright on As our corporate department recently reported, the U.S. Treasury has issued final regulations under Internal Revenue Code Section 409A. The following includes a summary of actions that employers should take by December 31, 2007 to comply with the final regulations and to guard against taxation of nonqualified deferred compensation and a 20 percent excise tax: Review … Continue Reading
