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New White Paper Series: Employee Stock Options for the Recipient

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Montgomery Investment Technology is pleased to bring you a series of White Papers which explain the structure, risks, and rewards of employee stock options from the point of view of the recipients (participants in a stock option award program). In the first installment, we explain how an employee stock option works and point out the key features which should be understood by every recipient. The second installment discusses the value represented by an employee stock option as compared ...

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Headwinds for Employee Stock Options

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For the past five years, US equities have been on a stunning uptrend, with the S&P 500 Exchange Traded Fund (ETF: SPY) increasing from 94.55 for the week of June 1, 2009 to 164.80 for the week of June 3, 2013. This move has been good news for recipients of employee stock options (ESOs) and other forms of share-based payment. Recent comments by Federal Reserve Chairman Ben Bernanke have been met with dramatic responses in both equity and ...

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Employee Stock Options: Tax Loophole or Tax Deduction?

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Much has been said about some of the high profile IPOs in recent years (Zynga, Facebook, Groupon, LinkedIn) questioning whether the tax deduction that the corporations are receiving is justifiable when the companies have a pre-tax income.

Facebook is an excellent example. Pre-tax, they managed to swing to a profit. After income taxes, they are to receive an approximately $500 million refund.

There are a couple of reasons for this situation:

Net Operating Loss carry ...

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Should You Issue ISOs or NQs for Your Employees?

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Equity Compensation is a vehicle for paying employees, directors and other consultants for work they perform for an organization. The most popular form of Equity Compensation is the Employee Stock Option (ESO).

ESOs come in two major forms that companies need to be aware of prior to making grants to their employees through an equity compensation plan. The types of employee stock options are Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NQs).

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Selecting the Peer Group for a TSR Program: Real Performance or Risky Business?

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The popularity of Relative TSR programs as long-term incentive plans for senior managers is due in large measure to a number of commonly acknowledged assumptions, or “conventional wisdom.”

  • Management will be incentivized to outperform their peers in a given industry when measured by the overall return of their employers’ shares over a fixed performance period. The choice of metric is assumed to align the interests of management with the interests of shareholders.
  • The choice of an appropriate peer ...
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