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FASB Update Raises Questions About Methods for Withholding on Equity Awards
A recent change in financial accounting standards has resulted in questions regarding the U.S. income tax withholding rules applicable to equity compensation. As background, in March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, Compensation-- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to simplify accounting for equity grants to employees. Prior to ASU 2016-09, in order to avoid unfavorable liability accounting for equity compensation, net share settlement of an equity award was required to be limited to a number of withheld shares having a value that did not exceed the applicable "minimum statutory withholding" obligations. Under ASU 2016-09, FASB allows favorable financial accounting treatment for equity awards if the number of shares that are withheld pursuant to net share settlement (and the taxes paid in cash) does not exceed a number of shares having a value equal to tax withholding obligations calculated using rates of up to the "maximum statutory tax rates in the applicable jurisdiction." ASU 2016-09 generally is effective for 2017 for calendaryear public companies, although early adoption is permitted. READ MORE
Tax on CEOs problematic
Portland put itself in the international spotlight recently when it adopted the nation’s first “CEO tax,” scheduled to go into effect next year.
The tax requires any company doing business in Portland to pay a 10 percent surcharge on top of the city’s existing 2.2 percent business license tax if its chief executive officer’s compensation is more than 100 times the median pay of all its workers. Companies with CEOs who make 250 times employees’ median pay will pay a 25 percent CEO tax.
As Fortune magazine tartly put it: “Portland, Ore., is on a crusade to solve income inequality, even if only in its mind.” READ MORE
PROHIBITING SALARY HISTORY REQUESTS: A NEW TREND IN EQUAL PAY LAWS?
Philadelphia employers will no longer be able to ask job applicants about salary history under an ordinance (Bill No. 160840) that Mayor Jim Kenney signed into law on Jan. 23.
The measure, effective May 23, makes Philadelphia the latest jurisdiction to combat pay discrimination by imposing limitations on the way employers use workers’ salary histories to set compensation. Massachusetts included a ban on salary history queries as part of a sweeping equal pay law that was signed Aug. 1, 2016. Also in 2016, California addressed salary histories in an amendment to its existing equal pay law. READ MORE
12 Real People Discover What the Pay Gap Looks Like
As snow turned to slush on a Saturday in late December, 12 strangers gathered at Glamour’s offices to take on a loaded issue: the gender pay gap. For two decades, Glamour’s Salary Survey has looked at what women in various fields earn across the country. But on this, its twentieth anniversary, we wanted to see how women’s pay compares to men’s. Are women really lagging behind?
So we asked 12 gutsy women and men in similar jobs, with similar titles and levels of experience, to come clean about their earnings. It wasn’t easy—most Americans would rather reveal their sex secrets than their salaries. But we found six pairs willing to be brave: two software engineers, two data analysts, two social media managers working in public relations, a duo in sales, a couple of cashiers, and a pair of graphic designers. All the participants wrote their salaries on large cards. Then we asked each pair—on the count of three—to flip their cards over. READ MORE
These Are The College Degrees That Earn The Highest Salaries
With student loans reaching an all-time high, it's no surprise that many are now questioning whether their education is worth the expense.
The average 2015 college graduate completed their education with $35,051 in student loan debt, according to a study by Edvisor, and a survey by Salary.com found that 35% of 15,000 respondents believe a degree isn't worth the price tag, with another 43% claiming it isn’t necessary to succeed in life.
While not all degrees are created equal, and you can always find a career in a field you didn’t major in, certain degrees are a better bet for students looking for the highest return on their education investment. In fact, a 2015 report by Georgetown University’s Center on Education and the Workforce estimated that the difference in lifetime wages between the highest- and lowest-paying college majors is about $3.4 million. READ MORE
Super Bowl ad touts equal pay
Audi's Super Bowl LI commercial had a strong message about equal pay.
It featured a little girl competing in a soapbox car race as the girl's father narrates his struggle to discuss gender equality with her.
"What do I tell my daughter?" the father says. "Do I tell her that her grandpa's worth more than her grandma? That her dad is worth more than her mom? Do I tell her that despite her education, her drive, her skills, her intelligence, she will automatically be valued as less than every man she ever meets? Or maybe I'll be able to tell her something different." READ MORE
Proposed Regulations Provide Helpful Guidance for Sec. 457(f) Plans
For many years, the IRS has promised to issue regulations for Sec. 457(f) plans, largely because taxpayers and practitioners sorely needed detailed guidance addressing certain issues. Finally, the IRS issued proposed regulations (REG-147196-07) in June 2016, and they provide helpful guidance and even some welcome news. The regulations are effective for calendar years beginning after the date the IRS publishes final regulations, but taxpayers may rely on the proposed regulations in the interim.
A Sec. 457(f) plan is a deferred compensation plan sponsored by a state or local government or by a tax-exempt entity. The rules regarding Sec. 457(f) plans get a lot of attention because an employee's benefits are subject to income tax upon vesting, even if they are paid later, a situation that usually is viewed as unfavorable. Employers and employees that do not realize they have a Sec. 457(f) plan or do not realize that the amounts have vested and are therefore currently taxable can be in for a shock. Besides taxes on the vested amounts, employees can be subject to interest and penalties for not paying the taxes on time. READ MORE
Here's What the Distribution of Wages Looks Like in America
This drive of the American economy to expand is none more apparent than the 2015 wage statistics culled by the Social Security Administration (SSA) from more than 160 million people in the labor force. If you earned wages in 2015 that required you to pay the FICA tax, or you wound up netting payment from a deferred compensation plan, you're included in the SSA's wage statistics data.
In total, $7.145 trillion in compensation was earned during 2015 and subject to federal income taxes. Another $273.7 billion was also paid out by deferred compensation plans, such as a pension or a retirement plan (e.g., 401(k)). After exclusions, some $7.42 trillion in net compensation was paid to Americans in 2015. READ MORE
Oracle sues its own star sales rep after she wins back $200k in pay fight
Oracle, which requires salespeople to agree to binding arbitration to avoid costly disputes in court, is unhappy that an arbitrator ruled against it. So it is suing one of its own employees, applications account manager Felicia Wilson, in a New York court to undo the arbitrator's $257,335.79 award.
That's the amount Oracle withheld from Wilson's $616,302.31 commission payment for the company's fiscal 2014. It would have been $873,638.10 but for Oracle's insistence that Wilson's Individualized Compensation Plan limits commission sales credits from any single customer in excess of 250 per cent of the salesperson's quota in a given year. READ MORE
If You Want to Be a Rich CEO, Work in Health Care
Managing doctors and researchers might be more lucrative than overseeing bankers or computer programmers.
Among the 200 top-paid U.S. executives at public companies, those in health care and pharmaceutical businesses were awarded average pay packages of $37 million in their most recent fiscal year, the most of any sector, according to the Bloomberg Pay Index, which ranks executives based on awarded compensation. Information-technology managers were No. 2 at $35.3 million. READ MORE
Trump to Order Dodd-Frank Review, Halt Obama Fiduciary Rule
President Donald Trump will order a sweeping review of the Dodd-Frank Act rules enacted in response to the 2008 financial crisis, a White House official said, signing an executive action Friday designed to significantly scale back the regulatory system put in place in 2010.
Trump also will halt another of former President Barack Obama’s regulations, hated by the financial industry, that requires advisers on retirement accounts to work in the best interests of their clients. Trump’s order will give the new administration time to review the change, known as the fiduciary rule.
Taken together, the actions are designed to lay down the Trump administration’s approach to financial markets, with an emphasis on removing regulatory burdens and opening up investor options, said the White House official, who briefed reporters on condition of anonymity. READ MORE
Why Feedback Trumps Performance Reviews (And How To Deliver It)
NPR recently ran a great piece, and the title said it all: “Yay, It's Time For My Performance Review! (Said No One Ever).” Performance reviews, performance management, performance ranking — whatever you want to call it — are trending out of favor, and for good reason. They are expensive to create, time-consuming to execute, and in most cases, they hinder employee engagement.
It’s not that people don’t like being reviewed. In fact, millennial employees in particular crave feedback. The problem is how and why -- performance reviews are carried out.
Deloitte estimated that its performance rating system consumed over 2 million hours of work, but when asked, more than half of Deloitte's executives (58%) reported that the process was not an effective use of their time. Deloitte's findings align with research from CEB, which similarly found that 84% of HR managers said their systems for assessing employees needed an overhaul (only 4 percent of HR managers even thought their systems were effective at measuring performance). READ MORE
Is it time for an incentive mine sweep?
As Neel Doshi and Lindsay McGregor share in Primed to Perform, “no topic raises passion like pay.” And as they reflect, “pay-for-performance is neither inherently good nor inherently bad. Depending on the circumstances, it can be either, both, or neither.” There! Problem solved? Clearly not, and the authors go on to describe how the key to great performance “is knowing when pay-for-performance works and when it doesn’t.”
Indeed, corporate incentives have rightly taken a central role in discussions of risk, compliance, and ethics. Incentives are an inherent feature of every corporation, and a key part of their governance structures. They are designed to drive good behavior and performance, but they can also invariably drive conduct beyond what was intended, and sometimes far worse than top management could have envisioned. Perverse incentives can be so insidious that they can drive good people to do things that they look back on with surprise and regret, usually when it’s too late. But such incentives lurk in every major corporation, waiting to be triggered by the right set of circumstances, like hidden land mines ready to explode, plastering the results on the front page of major newspapers. READ MORE
CEOs Earn Less at More-Prestigious Firms
Research has found that superstar CEOs, those who win awards like “CEO of the year,” can earn an average of about $7.8 million more in annual pay. But what about superstar firms? Can prestigious companies get away with paying their CEOs less?
We investigated this question in an empirical analysis published in the Journal of Financial Economics. We identified prestigious firms as those that ranked in the top 100 of Fortune’s annual America’s Most Admired Companies (MAC) list from 1992 and 2010. The ranking is based on surveys of senior executives, outside directors, and financial analysts, who select the 10 firms they most admire. We also obtained data on U.S. CEO salaries from ExecuComp, a data set on top executive compensation for all firms in the S&P 1500. We compared CEO pay at the top 100 Most Admired Companies to CEO pay at the 900 other largest U.S. companies. Our final sample included 1,711 firms and 3,191 CEOs. READ MORE
Trump’s Proposed Changes to Tax, Dodd-Frank, DOL Could Impact Executive Compensation
President Donald Trump’s campaign proposals included changes to tax rates and a promise to repeal the Dodd-Frank Act. If enacted, these proposals could have a significant impact on the way businesses handle executive compensation, permitting companies greater flexibility in structuring compensation arrangements. His staff also hinted at a reversal of Department of Labor (DOL) conflict of interest regulations. However, even if these proposals are enacted, some aspects of compensation programs that companies implemented to comply with current or, in the case of the DOL rules, anticipated requirements are likely here to stay given their popularity with institutional shareholders or due to the significant business restructuring already undertaken. READ MORE
Injunction of the DOL's Overtime Rule and Its Appeal
The Legal Landscape
In a ruling announced on Nov. 22, just days before a Dec. 1 effective date, U.S. District Judge Amos L. Mazzant of the Eastern District of Texas halted nationwide the effectiveness of the new regulations. These regulations would have more than doubled the salary level required to be paid by employers to those employees who are classified as exempt from receiving overtime pay.
The DOL has appealed the ruling, and the court has granted the DOL’s request for the appeal to be heard on an expedited basis. However, the appeal will not be “ripe for decision” until after a new Trump Administration and a new Congress take office.
The Current Political Landscape
Trump has appointed a known opponent of the new overtime rule to be Secretary of Labor. Some Congressional Republicans are planning an attempt to revoke the new regulations in the new Congress through use of the Congressional Review Act. READ MORE
Firms Give More Stock Options When They’re Committing Fraud
Whistleblowers can play in a big role in uncovering financial misconduct. For example, look at Sherron Watkins, formerly of Enron, and Cynthia Cooper, formerly of WorldCom. Both women helped uncover massive frauds inside their organizations that ultimately cost investors billions of dollars.
Research suggests that employees are often in a position to discover and expose wrongdoing in organizations. This may be why the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act encourages employee whistleblowing: Section 922 of the Act promises to protect whistleblowers from retaliation and offers monetary awards for disclosure, which range from 10% to 30% of monetary damages collected from the company. Since this program was established, the Securities and Exchange Commission (SEC) has granted more than $111 million in awards to 34 whistleblowers, with the largest award of $30 million granted in September 2014. READ MORE
5 Reasons Why You Should Not Give Employees Equity
When you start a business, it’s natural to want to feel like you’re all on the same team, and giving employees equity can align your staff around a common goal. But sharing equity with employees can have a lot of downsides. Here are five reasons to think twice before turning an employee into an owner:
1. Pressure to sell
Unless you declare a dividend, the only way employees’ shares will be worth anything is if you sell, which can add increased pressure for you to pursue an acquisition offer before you’re ready.
2. Loss of privacy
Your shareholders will expect reporting on how your company is doing and you may not always want to let staff see your most intimate financial details. READ MORE
Trump rally makes stock options great again for some CEOs
Donald Trump once described Jamie Dimon as "the worst banker in the United States," but the president-elect has helped make the boss of JPMorgan Chase & Co (JPM.N) $50 million richer.
Dimon is the top beneficiary among the 30 chief executives who run companies in the Dow Jones Industrial Average index from a stock rally inspired by Trump's election, according to a Reuters analysis of their option grants. READ MORE