Section 6039 of the Internal Revenue Code requires corporations to provide information statements to employees (including former employees) and information filings to the IRS regarding exercises of incentive stock options (ISOs) by employees and former employees. Similar information statements and filings are required to report transfers of shares of stock by employees and former employees that were purchased under an employee stock purchase plan (ESPP) designed to meet the requirements of Section 423 of the Internal Revenue Code. To satisfy the information return and statement requirements, companies will need to complete and file Form 3921 with respect to ISO exercises and Form 3922 with respect to ESPP transfers, as applicable.
These deadlines are at the end of the memo:
With respect to ISO exercises and ESPP share transfers that occurred in 2016, Copy A of the respective form must be filed with the IRS no later than February 28, 2017, if filing on paper, or March 31, 2017, if filing electronically. A 30-day extension of the Copy A deadline may be requested and obtained by filing a Form 8809 with the IRS before the original filing deadline. An extension request on Form 8809 may be filed electronically. Copy B of the respective form must be furnished to the applicable employee or former employee by January 31, 2017.
I just blogged something lengthy over on TheCorporateCounsel.net about how rare it is for a deal lawyer to be tapped as the SEC Chair. Yesterday, Sullivan & Cromwell’s Jay Clayton was named by President-Elect Trump as Chair White’s successor. As I blogged, Jay won’t likely need to clear much of a hurdle during his Senate confirmation hearings – but given Trump’s posturing during his campaign, he will need to sit through questions about his ties to Goldman Sachs – including his wife’s job there (as noted in this Reuters article).
Some folks asked me yesterday what was “normal” for a SEC Chair. There really isn’t a standard for the job – the backgrounds of former SEC Chairs are all over the lot. A few have worked at the SEC before. Chair Levitt wasn’t a lawyer. Chair White was a prosecutor. Chair Ruder was an academic. Chair Cox was a Congressman. And it’s not the sort of appointment where you read tea leaves from past writings. Obviously, someone’s background plays a role – but the biggest indicator of what a Chair will do is looking at the general direction the President points to…and since Trump has sent us mixed messages what he feels about executive pay, it still really is hard to know where this bus is headed…
This Equilar study says that stock grants are declining among the S&P 500. Here are some of the key findings:
– The average number of shares granted at S&P 500 companies overall declined during the past five years.
– Just over 80% of S&P 500 companies granted performance equity to their executives and about 65% granted options in 2015, the reverse of what held in 2011.
– Approximately 80% of companies in the technology sector granted performance equity in 2015, the lowest prevalence of any sector, while about 90% of the utilities sector granted performance equity, the highest.
– Total dilution overhang from stock options and restricted stock declined from approximately 5.2% in 2011 to 2.9% at the median in 2015. The decline was almost entirely attributable to waning stock option overhang.
This study reports the results of a survey suggesting that a lot of the payoff on options & other performance-based comp is based on a roll of the dice:
We empirically estimate that approximately 90% of option-based compensation constitutes pay for luck. This value is very robust, and stems from the inherent fact that chance plays a dominant role in determining firm performance. The impact of a manager on her expected compensation via the improvement of firm performance is low, hence, in contrast to common wisdom, standard option-based compensation does not constitute a strong motivating force for rational managers.
Gender pay gap reporting will go ahead in the UK after the government published its final pay gap reporting regulations and its response to the consultation on the requirements. The government said it remains committed to achieving legislative approval by Parliament so that they can enter into force in April 2017.
The government said there were some arguments that the regulations – which will come into force under section 208 of the “Equality Act 2010” – should apply to smaller companies than proposed. However, the government has stuck to its decision that the regulations will apply to companies with 250 employees or over.
The government said it would require these companies to collect information on the hours and earnings of employees during the pay period in which a ‘snapshot date’ in April falls. This had been proposed as 3oth April but will now be 5th April to fall in line with tax years as respondents had indicated that collating the information would then be easier. The government said the regulations were one element of its strategy to meet the needs of women at every stage of their working lives. The government said it knew the causes of the gender pay gap were complex and its strategy must span education, business and the executive pipeline.
As announced in February, the government said it would provide a package of support to help employers calculate and address their gender pay gap. This would include a campaign of UK-wide events and multimedia guidance to help employers calculate their gender pay gap, gender bonus gap and the numbers of men and women at different pay quartiles and targeted support for smaller employers, and those in sectors that are least advanced on gender equality.
The regulations will require employers to publish the gender pay gap information on their own website in a manner that is accessible to employees and the public. In addition, employers must also publish the information to a government website. Some respondents, notably trade union bodies, indicated that companies that did not comply should face sanctions however the government said it did not propose any additional enforcement. However, the government noted, that non-compliance would constitute an ‘unlawful act’ and fall within the existing enforcement powers of the Equality and Human Rights Commission (EHRC) under the Equality Act 2006.
Delaware’s Supreme Court awarded over $16 million to a private company’s optionees in Fox v. CDX Holdings. The court upheld trial court findings that Plan terms (and the associated contractual rights of optionees) were violated both because (1) management, rather than the Board as plan administrator, determined “fair market value” in the step one spin-off, and (2) option proceeds were improperly held-back as part of the post-closing escrow arrangement that was built into the second-step merger agreement.
The Pensions and Lifetime Savings Association (PLSA), the membership body for UK’s pension funds, has published its “AGM Season Report 2016,” focusing on executive pay using data provided by Manifest. A survey of PLSA members for the report found that 87% of respondents believe executive pay is too high.
A majority – two-thirds (63%) – of the 87% believe executive pay is generally too high, while 37% say it’s too high in cases of poor performance. Pension funds also have serious concerns about the pay gap between executives and their workforce with 85% of respondents highlighting it as a problem.
Yesterday, ISS Corporate Solutions issued this primer that provides the basics of ISS Research’s Equity Plan Scorecard methodology that will affect meetings occurring on – or after – February 1st (see Appendix D for the ISS 2017 burn rates).
On Monday, the SEC announced that Neustar had settled whistleblower charges for routinely entering into severance agreements that contained a broad non-disparagement clause forbidding former employees from engaging with the SEC and other regulators “in any communication that disparages, denigrates, maligns or impugns” the company. Former employees could be compelled to forfeit all but $100 of their severance pay for breaching the clause. And yesterday, the SEC settled with SandRidge Energy over separation agreements & retaliation. This WSJ article says more of these cases to come…
Just one more enforcement case as the SEC continues to hammer home the need to modify agreements that contain anti-retaliation leanings. Tune in next year to this TheCorporateCounsel.net webcast – “Whistleblowers: What Companies Should Be Doing Now“…
I haven’t hashed out all the FAQs. But for the peer group ones, the changes are fairly minor & often ministerial, as reflected in this blackline of those FAQs…