Equity Compensation

Although defined contribution (DC) plans are the most popular way for employees to store up money for retirement, savings in these plans is severely limited for high-earning executives, notes Marc McDonough, vice president of Schwab Stock Plan Services in Denver. Due to statutory limits on defined contribution plan deferrals, “an executive making $250,000 can put only about 7% of compensation in a DC plan,” he says.
 
Corporations use equity compensation plans—granting company stock to employees or giving them the option to purchase company stock—to attract and retain the best talent. Whether it is to fill in the retirement savings gap or increase overall financial well-being, these plans are a big driver for attracting executives, who see them as an opportunity to save more than they can in a defined contribution plan, McDonough says.  Read More

Did I just get a raw deal from my deferred-compensation plan?

Deferred compensation plans can be a tremendous tax saver but when things don't go as planned, they can cause greater taxation to increase substantially.

Q. I've been participating in my company's deferred-compensation plan. "Unfortunately" my company was just sold and all funds from my deferred-compensation plan have been paid out as income in a lump sum (so much for distributions dragged out over years in a lower tax bracket). I'm a bit miffed for two reasons: 1) I'm worried that this and other income garnered from my company's sale will put me in a higher tax bracket such that had I never participated in the deferred-compensation plan I'd have been better off (understanding hindsight and all) and 2) I moved to GA a year ago, but prior to that I lived in FL where the majority of my deferred compensation was earned. Since I was paid out in GA, state taxes were withheld from the full amount. Do I have to pay GA state tax on my FL deferred income (at least the basis amount)? Thanks, BeckyRead More

Reasonable Compensation Issues Remain On the IRS Radar Part II: S-Corporation Concerns

Our May 26, 2016 article, Reasonable Compensation Issues Remain on the IRS Radar ("Part I"), discussed how the IRS scrutinizes the reasonableness of compensation payments made to C-corporation shareholder-employees.  As indicated in Part I, when a C-corporation is involved, the IRS often argues that the compensation is unreasonably high and paid to avoid the double tax on corporate profits.  However, the IRS also challenges compensation payments made to S-corporation shareholder-employees.  As discussed below, when an S-corporation is involved, there is a risk the IRS will take the opposite approach and argue that the compensation is unreasonably low. 

Income Tax Issue

Unlike a C-corporation, an S-corporation's earnings are not typically subject to double tax because its earnings are not taxed at the corporate level.  Instead, the S-corporation's earnings "pass through" to the shareholders and are taxed at the shareholder level regardless of whether the earnings are actually distributed to the shareholders (for ease of reference, the distribution of earnings will be referred to in this article as "dividends").  The shareholders generally receive the dividends tax free because the shareholders have already paid tax on the earnings. Read More   

Compensation for outside corporate directors increased moderately in 2015

ARLINGTON, Va., July 19, 2016 (GLOBE NEWSWIRE) -- Total pay for outside directors at the nation's largest corporations increased by a modest 3% in 2015, driven by increases in both cash and stock compensation, according to a new analysis by Willis Towers Watson (NASDAQ:WLTW), a leading global advisory, broking and solutions company. The study also found the annual cash retainer for board service reached $100,000 for the first time as companies continue to push toward a fixed approach to director pay.

Read more: http://www.nasdaq.com/press-release/compensation-for-outside-corporate-directors-increased-moderately-in-2015-20160719-00587#ixzz4ExMk2E5K

Let’s do the numbers: CEOs still make way more money than you - By Donna Tam

CEOs on average made $15.5 million last year, which is 276 times more than a typical worker did, according to a study released Tuesday

These figures actually show a smaller gap than the previous year. In 2014, that ratio was 302-to-1, with CEOs earning $16.3 million.

Employee Benefits and Executive Compensation Alert - Venable LLP

The IRS recently issued proposed regulations under Internal Revenue Code Section 409A for deferred compensation arrangements that apply to all employers. The IRS also recently proposed regulations under Internal Revenue Code Section 457 for deferred compensation plans of tax-exempts and governmental entities. In addition to traditional deferred compensation arrangements, certain employment agreement provisions, severance arrangements, equity grants and expense reimbursement arrangements, and other similar arrangements, may be impacted.

Proposed regulations under Section 409A

There are extensive existing final regulations and proposed regulations under 409A, and the recently issued proposed regulations modify both and clarify specific issues.

How One Company Put Its Team’s Compensation On The Line-And Sparked 10X > Growth

Ten years ago, LEAP Legal Software had grown slowly to only 27 employees its first 14 years in business. Today it has a team of 300 and generates $50 million in annual revenue. LEAP accelerated its growth dramatically by tying its team’s pay to achievement of its quarterly goals.

At LEAP legal software, Executive Chairman Richard Hugo-Hamman doesn’t worry about the Millennials on his team getting bored and jumping ship. They change jobs frequently, because the company has been growing so quickly.

The median compensation of CIOs in U.S. medical groups was $170,314 in 2015, according to the Medical Group Management Association

The median total compensation of CIOS in U.S. medical groups was $170,314 in 2015, according to executives at the Englewood, Colorado-based Medical Group Management Association. MGMA executives released that figure to Healthcare Informatics upon the release of broader statistics on June 27 around medical group CEO and group practice executive compensation, based on that association’s recent surveying of executives about what they earned.

MGMA’s compensation survey found that those executives who work for large practices and for hospital-owned group practices, are earning the highest salaries, with non-physician CEOs of medical group practices owned by hospitals having median compensation of $305,000, versus $242,000 being the median for non-physician CEOs at physician-owned practices. Meanwhile, the $170,314 figure that MGMA released exclusively to HCI detailing the median compensation for CIOs of medical group practices, places medical group CIO salaries somewhat lower on average than those of CIOs in hospitals, yet probably comparable with regard to organizational size.

Bank Of America Executive Compensation History Compared With Other Large Banks

William Darusmont

A friend, Graef "Bud" S. Crystal, wrote a book in 1992 titled In Search of Excess, an obvious parody on the Tom Peters, Robert Waterman Jr, book In Search of Excellence. I had conversations with Bud but never read the book till recently. What is amazing is that a book could have been published 24 years ago and investors not learn from it: they are giving away the store.

Crystal is no academic; he spent 25 years as a compensation analyst with Towers, Perrin, but seeing his suggestions to rein in compensation being ignored drove him to leave the business. Why didn't anyone object to the obvious? First, it wasn't in anyone's interest, except a few dissident shareholders. After all, why would a Wall Street firm support taking away money from the CEO of a client company? Frustrated, he went to U.C. Berkeley's Haas School of Business to teach and then wrote for both Forbes and later Bloomberg News.

How to Fix Wall Street’s Flawed System of Compensation

When a professor emeritus at the London School of Economics, who also spent many years as an adviser at the Bank of England, publicly endorses a much-needed – but generally overlooked – overhaul of Wall Street, that is an occasion for celebration.

The distinguished economist in question is Charles Goodhart, who, speaking with considerable gravitas and wit last week at a European Central Bank forum in Sintra, Portugal, wondered aloud why prudential regulators of the world’s financial system had spent so much time in recent years worrying about capital ratios and liquidity and so little time worrying about Wall Street governance and pay practices. These issues, he said, “much more fundamentally influence personal incentives and therefore business decisions.”

Growth Options and CEO Compensation

It is that time of year when CEO compensation is revealed and debated.  The Los Angeles Times just published its list of the 100 highest paid executives in California for 2015.  At the top of this list were co-CEOs Mark Hurd and Safra Catz of Oracle, each of whom received total compensation of $53.25 million.  A lot of money to be sure, but as most compensation analysts note, unreasonable given the impact their decisions can have on Oracle shareholders.  But if shareholder benefits are to be the basis for evaluating CEO compensation, how are shareholder benefits to be measured?

‘OBSESSION’ WITH STOCK-BASED COMPENSATION

When LinkedIn announced that it sold to Microsoft for $26.2 billion, the New York Times unveiled the “unspoken reason” behind the deal:  LinkedIn’s “reliance--some might say overreliance--on stock-based compensation.”

In 2015, LinkedIn had $510 million stock-based compensation expense, which represents 17 percent of its net revenue.

IRS Section 457(f) Proposed Regulations for Deferred Compensation of Tax-Exempt Organizations: Worth the Wait

The Internal Revenue Service (IRS) has issued long-anticipated proposed regulations governing Internal Revenue Code (Code) Section 457(f), which applies to nonqualified, unfunded deferred compensation plans or arrangements established by state and local governments and tax-exempt employers. The proposed regulations and related proposed regulations under Code Section 409A were published in the Federal Register on June 22, 2016.

CEO pay takes small haircut

Chief executive officers of the biggest publicly traded companies in the U.S. are still bringing home multi million-dollar paychecks.

They were just slightly smaller in 2015 than in 2014.

How to structure competitive executive compensation packages

Finding great candidates to fill executive positions is inherently difficult. Though quality candidates can be found, companies tend to lose their top pick because they can’t meet a candidate’s compensation expectations.

“Companies often enter into an executive search intending to construct a competitive compensation package for the right candidate,” says Tim Conti, managing partner at ON Partners. “But when it comes time to make an offer, the hiring company balks because an overly generous offer could disrupt the internal equity of compensation packages. That logic is irrelevant to the candidate.”

Is It Ever OK to Quit on the Spot?

For almost all of us, there comes a moment when we are tempted to quit our jobs on the spot.

A growing number are actually doing it, many employers say.

Some bosses blame young employees who feel frustrated by limited prospects or have little sense of attachment to their workplace. But employment experts say some older workers are quitting without notice as well. They feel overworked or unappreciated after years of laboring under pay cuts and expanded workloads imposed during the recession.

​Helping your employees understand their equity compensation

Although equity is an increasingly common form of total workplace compensation, many employees do not realize its full value.

In fact, in a recent Schwab survey of 1,000 residents in the San Francisco Bay Area, one third said they receive equity as part of their overall workplace compensation.

Compensation Plans for Customer Success Managers

There’s wide debate in the customer success discipline regarding the best structure for a CSM compensation plan. Typically, I see the following three CSM compensation models:

• Base Only – pure base salary with no bonus or variable component
• Base + Bonus – base salary with a small bonus structure, usually in the form of a Management by Objective (MBO) bonus
• Base + Variable – base salary with a variable component to not only reward for performance, but also to provide more upside for over-achievement against targets.

Equity Compensation Can Help with Overall Financial Plans

Whether it is to fill in the retirement savings gap or part of an overall financial strategy, equity compensation plans are attractive to employees.

Take another look at nonqualified deferred compensation plans

For executives, taking advantage of their company-sponsored, nonqualified deferred compensation (NQDC) plan now could be one of the wiser moves to make for their future well-being.