Equity Compensation

News & Analysis as of

Restructuring Liquidation Preferences

Job candidates may choose to work for a startup to help build something new, to work in an environment that fosters and rewards creativity, or to get the thrill of climbing aboard a “rocket ship.” New employees rarely, if...more

Equity compensation trend: extending the time to exercise vested stock options

A number of high-profile technology companies recently adjusted their equity compensation programs in a manner they hope will help attract employee talent by providing an extended period to exercise vested stock options after...more

New Rules on Section 83(b) Elections

Prior to a recent change, in order for a Section 83(b) election to be effective, the taxpayer had to: - File the Section 83(b) election within 30 days of the receipt of restricted property (typically, restricted stock)...more

Treasury Removes a Reporting Trap for Section 83(b) Elections

Taxpayers who receive property as payment for performing services are generally taxable on the value of the property received in the year of receipt. Section 83 may allow such taxation to be deferred when the property...more

Proposed Changes to Section 409A are Welcome (for the Most Part)

The Internal Revenue Service recently issued proposed regulations under Section 409A of the Internal Revenue Code (“Section 409A”) in an effort to clarify and modify parts of the current final regulations (issued in 2007) and...more

Consider Adding Separate Annual Sublimit on Director Equity Awards

In response to the Delaware Chancery Court’s 2012 and 2015 decisions in Seinfeld v. Slager and Calma v. Templeton and Facebook’s 2016 settlement of Espinoza v. Zuckerberg, public companies that are adopting or amending...more

Ninth Circuit Finds That Purpose Of Stock Rights Plan Matters

Most equity award plans that I come across include a statement of the plan’s purposes. I haven’t tended to give these provisions a whole lot of thought, but an opinion issued yesterday by the Ninth Circuit Court of Appeal...more

FASB modifies accounting rules for stock-based compensation

The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. ...more

A Short Summary of Qualified Small Business Stock Tax Benefits and Requirements

Many startups, investors, clients and friends have recently asked about the tax benefits associated with having stock qualify as qualified small business stock (QSBS). This is an important issue that investors, founders and...more

FASB Improves Employee Share-Based Payment Accounting

As part of an ongoing Simplification Initiative, the Financial Accounting Standards Board (the “Board”) recently issued an Update to Accounting Standards Codification (ASC) Topic 718, which deals with stock-based...more

Surviving the Strife: How Start-Up Founders Can Ensure That Inevitable Friction and Departures Won't Sink the Company

History is all too often repeated when start-up founders fail to plan for when (not if) they don’t see eye-to-eye. Relationship breakdowns and messy founder departures are common root causes of start-up failures. Common...more

In Case You Missed It: Launch Links - April 2016 #3

Some interesting links we found across the web this week: - Postscript: Bill Campbell, 1940-2016 - He may not be the most globally famous person who passed away this week, but Bill Campbell’s quiet influence on...more

Court Finds All of a Taxpayer’s Work for His Employer to be Personal Services in a Real Estate Business

The U.S. District Court for the Western District of Arkansas recently held that all of a taxpayer’s work for his employer, a property management company, counted toward the taxpayer’s satisfaction of the material...more

Allocating Founder Equity

There’s no legal definition for “founder,” but it is one of the most important roles in a startup. Designating someone a founder means a lot for the long-term future of the company and for that individual; it is the founders...more

Beefing Up Director Compensation Disclosures

With calendar year companies currently in the midst of drafting their proxy statements, it is time to consider the often overlooked director compensation disclosures. Changes in director compensation...more

Non-Equity Incentive Plans

We previously discussed the benefits of equity incentives. When it comes to compensating a start-up’s key people, equity incentives are often the best way to align interests with the founders. Sometimes, however, non-equity...more

House Passes Encouraging Employee Ownership Act

On February 3, 2016, the House passed H.R. 1675, the Encouraging Employee Ownership Act of 2015. The bill directs the SEC to revise regulations to require an issuer to furnish investors with additional specified disclosures...more

A Not So Frequently Asked Question – When Is An Event Infrequent?

Last January, the Financial Accounting Standards Board, which is better known as the FASB, issued Accounting Standards Update 2015-01. The update eliminates the concept (and definition) of “extraordinary item”. According to...more

2016 Proxy Advisory Firm Voting Guidelines: Canadian Highlights

As an early step in preparing for the upcoming proxy season, issuers should familiarize themselves with the Canadian proxy voting guidelines recently published by Institutional Shareholder Services Inc. (ISS) and Glass Lewis...more

ISS Issues 2016 FAQs and Addresses Proxy Access

ISS has issued a U.S. Equity Compensation Plans FAQ, U.S. Executive Compensation Policies FAQ and a U.S. Policies and Procedures FAQ. Here is a rough comparison of the 2015 U.S. Compensation Policies FAQ to the 2016 U.S....more

2016 Compensation Committee Handbook

The Executive Compensation and Benefits Group at Skadden, Arps, Slate, Meagher & Flom LLP is pleased to provide you with this second edition of its Compensation Committee Handbook. This edition reflects developments in...more

How to Prevent Poaching of Your Startup's Employees

Employee “poaching” is a fact of life in many industries. Such employee recruiting is not intrinsically illegal, as a matter of public policy the law generally favors the ability of employees to freely switch employers....more

Five Tips for a Successful Exit

Any number of factors can trigger a tech company’s exit: worn-out founders, anxious investors, industry consolidation, or wild, Instagram-like success. As tech founders and executives contemplate the possibility and timing of...more

International Tax Alert (US): Tax Court Invalidates Cost Sharing Regulation on Stock-Based Compensation. Now What?

The Tax Court in Altera Corp. v. Commissioner, 145 T.C. No. 3 (2015) has determined that Treas. Reg. §1.482-7(d)(2) requiring related taxpayers to share stock-based compensation (SBC) in a cost sharing arrangement (CSA) is...more

5 Bad Hiring & Firing Ideas Every Startup Entrepreneur Should Avoid

Five common employment-related mistakes startups make when launching their business (and why to avoid them before things get costly)....more

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