The Advisors' Blog

– Brent Longnecker, Longnecker & Associates

1. Accelerating Grants – We’re finding ourselves working w/ a lot of companies on taking advantage of the low prices we have out there and, in essence, “accelerating” next year’s grant to today. This was something that I actually did in 1987 after Black Monday while a partner at KPMG.

In addition, Microsoft did this immediately after the Justice Department handed down that negative ruling years ago, so there is good precedent—the trouble today is in the execution as well as the optics..like who should get it and who should not; how do you value the equity if one believes that the panic and hedge fund selling has created unrealistically low prices; and what type of long-term incentive vehicles do you grant? Again, where we find a strong argument that this will help significantly in the ability to retain and motivate, then it’s an idea worth pursuing;

2. This Year’s Grants—How should they be valued if 4 months ago you were at $70 and today you are at $10? And last years’ grant was at $60 and you have presentations saying that your enterprise value is $80? Is one LTI vehicle better than another for a time like this? Plus, whatever we do for the executives, we probably need to do for the directors as well, are all common issues that we are also working on and, in many cases, w/ no easy answers.

3. Change-in-Control—We have several projects as well dealing w/ CIC and how they are effected in an environment like this and again with multiple dynamics that need to be factored in…especially when these are front and center in DC.

4. Severance—And even in some cases, we’re having to work on employee severance packages while companies brace for the worst. Usually we find ourselves agreeing that standard norms don’t apply right now for the rank and file and that every bit of grace and consideration be given to those being put out into this market.

5. Ownership Guideline Issues—Again, as one can imagine, the low prices have impacted OGs significantly. The same was true in 1987, but there weren’t nearly as many companies w/ these back then as there are today. Again, care and consideration of all the factors are needed here like all the above.