I am not understanding how a prospective, not retroactive, reduction in corporate tax rates should result in boards of directors and executives thinking that this should justify a $1,000 bonus for every employee. Whether you are an airline, or a bank, or neither an airline or a bank. Nevermind pay-for-performance so that people about to be fired get the same as the … Read More
When is not vested equity not not vested?
Takeaway: Broader legal concepts may override the technical details of performance-based equity grants. My 13-year-old daughter is learning in her 7th grade math class about computations with negative numbers. This is one of the topics on the path from PEMDAS to Calculus that is predictably difficult for students. (I coach elementary and middle school math students so I speak … Read More
Equity Compensation in Private Companies – Still Full of Landmines
A new report by Proskauer Rose LLP summarizes IPO activity in 2016 and includes some of the equity compensation problems that continue to dog these new companies. For example, “66% of health care issuers received a cheap stock comment” from the SEC. (Proskauer includes biotech and biopharma companies in the “health care” sector.) What the SEC calls “cheap stock” – equity … Read More
The Real Risk of Working at a Startup
When we think of working at a startup, we might imagine a lower base salary, no annual bonus, sparse benefits, and lots of equity – usually stock options. Most realize that equity is a highly risky form of compensation and few startups ever make it to the IPO, another small number get acquired (at a much lower multiple than … Read More
Executive Compensation for Private Companies (sic)
Wikipedia says that: The Latin adverb sic (“thus”; “just as”; in full: sic erat scriptum, “thus was it written”) inserted after a quoted word or passage, indicates that the quoted matter has been transcribed exactly as found in the source text, complete with any erroneous or archaic spelling, surprising assertion, faulty reasoning, or other matter that might otherwise be taken as an error of transcription. I … Read More
Are We Paying CEOs All Wrong?
Last week’s article in Bloomberg Business Week “We’re Paying CEOs All Wrong” extended my work in Behavioral Economics and Equity Compensation to executive pay and then upward to CEO pay. I am flattered that the first two paragraphs of the article discussed my ideas although I thought it unnecessary to highlight that I have done this for “more than three decades” … Read More
Burn the ISS Burn Rate Table and Help Fix Income Inequality
“62 People Own As Much As Half of the Global Population” – that’s a catchy headline. Maybe correct, maybe not, but likely conceptually correct. An increasingly small number of people own an increasingly large proportion of the financial wealth in the world. I suspect that any of the compensation survey firms could perform a similar calculation about the collective compensation … Read More
What Equity Compensation Problem Are We Trying to Solve – ESPPs?
Equity Compensation Problems and Solutions Today I attended the NASPP Silicon Valley Chapter meeting to hear the presentation from Dr. John Hamman and Dr. Sebastian Goerg of Florida State University titled “Compensation Programs and their Behavioral Consequences”. They did a nice job addressing a complex subject before an audience of people who often think of employee behavior and equity compensation … Read More
The Unreported Complexity of Pre-IPO Equity Compensation
The headline this week in the Journal of Accountancy was “FASB share-based payments standard challenges private companies” reporting that the Financial Accounting Foundation review of FAS123(R) concluded that everything is fine…almost.Of course, FAS123(R) is now ASC Topic 718 which I would have thought the Financial Accounting Foundation would be aware of. They conclude that the rules: Ensure that the cost of equity … Read More
Performance Plans and Effective Equity – Davos and Venn Diagrams
A recurring question about the effectiveness of equity compensation centers around performance plans: Are these truly performance incentives or merely pay delivery vehicles that provide some comfort to shareholders that equity compensation gains realized by executives will be aligned with some indicator of corporate performance? I was invited to present my perspective on this question this month at the Employee … Read More
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