Archive for 'ESOs'

Update on ISS Performance Metrics for 2017

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Institutional Shareholder Services (ISS) has announced a new methodology for its pay-for-performance models which will become effective on February 1, 2017. The announcement states that additional criteria will be introduced as metrics for the evaluation of corporate performance for the evaluation of executive compensation programs.

In addition to the use of total shareholder return (TSR), ISS will present relative evaluations of:

• Return on equity
• Return on assets
• Return on invested capital
• Revenue growth
• EBITDA growth
• Growth in cash flow ...

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Changes to ASC Topic 718 Are On the Horizon

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In March of this year, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU 2016-09) entitled Improvements to Employee Share-Based Payment Accounting. This document describes changes to ASC Topic 718, which governs accounting for stock or other share-based compensation. This includes restricted stock, employee stock options, and relative total shareholder awards among other instruments. The changes to ASC 718 set forth in ASU 2016-09 will take effect for public companies for annual periods which begin after December ...

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IRS Proposes Changes to Section 409A Regulations

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On June 21, 2016, the IRS issued some proposed regulations which clarify or modify certain provisions of IRC Section 409A which have an impact on non-qualified deferred compensation and stock plans. Some of the proposed regulations have an effect on employee stock options (ESOs), restricted stock units (RSUs), and stock appreciation rights (SARs). Prior to this issue, the IRS had provided informal guidance on a case-by-case basis.

Although the text of the proposed regulations is lengthy, excellent commentary has been ...

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Estimation of Discount from Grant-Date Fair Value for Share-Based Awards with Post-Vest Holding Periods

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In our previous blog post, we discussed comments by the SEC regarding the application of discounts to the grant-date fair value of share-based awards which include post-vest holding periods. In accordance with ASC 718-10-30-10, we consider the effect of the post-vest holding period on the grant-date fair value and estimate a discount. The academic literature presents a number of different models for the estimation of the discount, which depends upon the volatility of the company’s shares and the length of ...

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SEC Comments on Grant-Date Fair Value Discount for Share-Based Awards with Post-Vest Holding Periods

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We have noted a recent trend in incentive compensation practice regarding the inclusion of a Post Vest Holding Period as a provision in new awards. Post-Vest Holding Periods (PVHPs) require that any shares acquired as the result of the exercise of an ESO or the vesting of a TSR must be held for a specified period of time before they can be sold. Such provisions may result in a decrease in the fair value of the award, and afford an ...

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Twitter IPO Prompts Senators to Renew Call to Eliminate “Loophole”

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On the eve of the high-profile Twitter IPO last week, Senators Carl Levin (D – Michigan) and John McCain (R – Arizona) issued a joint statement calling for the elimination of the corporate tax deduction (“loophole”) for share-based compensation of employees at fair value. Invoking the federal deficit and the horror of the “sequester,” these gentlemen further stated that the “Joint Committee on Taxation has estimated that ending this tax break would raise $23 billion for the US Treasury.”

Now, we’re ...

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CEO to Worker Pay Ratio Disclosure Open for Comments

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On September 18, 2013, the SEC voted 3 to 2 to propose a rule which would require public companies to disclose the ratio of the compensation of its chief executive officer (CEO) to the median compensation of its employees. The new rule is required under Section 953(b) of the Dodd-Frank “Wall Street Reform and Consumer Protection Act” of 2010. The proposed rule was published in the Federal Register of October 1, 2013. Interested parties have until December 2, 2013 to ...

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Share-Based Payment > Best Practice Series > Dow 30 FY2012

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As part of our Share-Based Payment (SBP) Best Practice Series, Montgomery Investment Technology is pleased to provide you with our research which focuses on the valuation techniques and disclosures based on the 2012 10-K and DEF14A filings of the Dow Jones Industrial Average companies. We have compiled a two page report illustrating how the Dow 30 companies are complying with Accounting Standards Codification 718 (formerly FAS 123R) and what forms of Share-Based Payments each company provides. This report ...

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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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