1 / 11

NASPP Phoenix Chapter

NASPP Phoenix Chapter . Roundtable Discussion: Working Together to Find Solutions to Challenges Tuesday, August 9, 2011 Moderators: Pam Ellis, CEP and Sara Shoaf, CEP – Solium Capital. Discussion #1 - Scenario.

luna
Download Presentation

NASPP Phoenix Chapter

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. NASPP Phoenix Chapter Roundtable Discussion: Working Together to Find Solutions to Challenges Tuesday, August 9, 2011 Moderators: Pam Ellis, CEP and Sara Shoaf, CEP – Solium Capital

  2. Discussion #1 - Scenario • Company ABC is a privately held firm that has been granting ISOs for the last ten years. • Many early grants to key long-term employees are coming up on expiration and have not been exercised, even though they are in the money. • The company has no immediate plans to go public or be acquired by a public company. • The CEO has asked you to propose a way to motivate employees to exercise these options or provide a method to compensate them for the value on the table.

  3. Discussion #1 - Brainstorm • Should the company “force” these employees to exercise or compensate them for the value? Why or why not? • Why are employees not exercising? Is there a way to change their perceptions (and therefore behavior) without forcing an exercise? • What are potential solutions for the company to offer to employees and the implications of each proposal? • Should the company consider other ways to compensate employees that provide better reward?

  4. Discussion #1 - Proposal • No obligation to force or compensate • Purely a company decision • Could set a precedent • Potential solutions • Auto-exercise • Loan program • Replacement grant with immediately vested shares • Cash bonus for walkaway value • Company repurchase program • Employee education

  5. Discussion #2 - Scenario • In February, you discover by chance that the federal and state tax rates in your stock plan database have been inaccurate since last year, resulting in a large number of transactions with incorrect tax withholding. • In all cases, both taxes were underwithheld for option exercises and RSA/RSU releases. • Cashless and sell-to-cover exercises allowed • Sell-to-cover taxes for releases allowed • The error was due to a manual entry on your part. • What should you do?

  6. Discussion #2 - Brainstorm • Should you raise the issue? Why or why not? • If yes, how do you raise it and with whom? • Should the transactions be corrected? If so, how? • What is the impact to the company? To the employee? • Tax reporting and withholding, penalties • SOX compliance • Employee relations • How should this situation be avoided in the future? • Preventative and detective measures

  7. Discussion #2 - Proposal • Yes, this issue should be raised! • Solutions • Assessment of potential impact • Correct original transactions or deal with resulting consequences • Employee notification • Avoid this situation in the future • Source of tax rates, entry of rates in stock system • Audits

  8. Discussion #3 - Scenario • Currently Company XYZ grants options on a limited basis in five different countries; however, these plan participants have a high degree of mobility between countries due to the company’s type of business. • The company does not track mobility for equity purposes and uses the residence location at time of exercise for tax calculations. The company has (fortunately) not been audited from a global tax perspective yet. • The company is fully committed to equity as a form of compensation for their global workforce. • The CFO has asked you to evaluate the costs of compliance to support this global mobile population versus the risk exposure.

  9. Discussion #3 - Brainstorm • How would you conduct this assessment? • What is an acceptable level of risk in this area? • Whose risk is it – the company’s? the employee’s? • If the employee is at risk, what is the company’s obligation to educate the employee on the risks or minimize it? • Are there better alternatives to meet the company’s objectives while minimizing risk?

  10. Discussion #3 - Proposal • Risk assessment • Tax reporting and withholding requirements for mobile employees by country • Administrative costs to track, tax advisors/resources • Employee impact • Solutions • Tax advisors/preparers • Assistance with tax payments • Cash bonus plans with criteria based on company or stock performance

  11. So What Did We Learn? • Collaborative approach with multiple perspectives to solve real-world challenges • Leverage your peers, co-workers and industry experts • No need to reinvent the wheel • Don’t be afraid to ask for help • Sometimes there are no clear and easy answers • Can be difficult balancing what you SHOULD do versus what you CAN do • Have to make an informed decision regardless – do your homework and know what you’re getting into

More Related