Executive Compensation

Subscribe to Executive Compensation via RSS

Compensation is generally subject to federal income tax and FICA tax when compensation is actually paid to an employee. However, nonqualified deferred compensation (NQDC) may be subject to FICA taxation before federal income taxation under a FICA tax special timing rule. The scope of NQDC subject to FICA taxation is…

Companies are increasingly allowing their chief executive officers and, in certain circumstances, other executives to use corporate jets (which may be chartered flights or fractionally or fully owned aircraft) for personal use due to various reasons. Although this benefit may be a relatively small percentage of an executive’s overall compensation…

The Court of Appeal has remitted the case of BlueCrest Capital Management (UK) LLP (BlueCrest) v HMRC back to the First-tier Tribunal (FTT) regarding the application of the UK’s salaried members rules (the Rules) to certain members of BlueCrest, an asset manager engaged in the provision of hedge fund management…

Earlier this month, the Internal Revenue Service (“IRS”) released Form 15620, which is an approved IRS form for making Internal Revenue Code (“Code”) Section 83(b) elections.  By way of background, Code Section 83(b) provides taxpayers with the ability to include the fair market value of nonvested property over the…

The Upper Tribunal (UT) has upheld the decision of the First‑tier Tribunal (FTT) regarding the application of the UK’s salaried member rules (the Rules) to certain members of BlueCrest Capital Management (UK) LLP (BlueCrest), an asset manager engaged in the provision of hedge fund management services. We previously reported on…

Employers that are tax-exempt or have tax-exempt affiliates (for example, a foundation) should pay close attention to a 21% excise tax under Section 4960 of the Internal Revenue Code on certain executive compensation.  Final Regulations under Section 4960 are described here.  The discussion includes traps for the unwary.  Please…

Over the past few months, the Securities and Exchange Commission (the “SEC”) has imposed civil penalties in the hundreds of thousands of dollars against multiple publicly traded corporations in connection with their failure to disclosure certain perquisites and personal benefits provided to senior executive officers, including travel, lodging and entertainment fringes and expenses.

Employers that are tax-exempt or have tax-exempt affiliates (for example, a foundation) should pay close attention to a 21% excise tax under Section 4960 of the Internal Revenue Code on certain executive compensation.  Proposed Regulations under Section 4960 are described here.  The discussion includes traps for the unwary.  Please…

We continue our blog series on COVID-19 implications on executive compensation matters with a post that addresses considerations relating to amending performance goals under equity and other incentive awards.

Setting meaningful and effective performance goals often requires significant focus and analysis by compensation committees with the assistance of their advisors…

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (H.R. 748).

In this blog post we (1) lay out an initial action plan for employers considering obtaining relief under the CARES Act, (2) summarize the compensation-related provisions of the CARES Act, and (3) identify the key questions that the CARES Act leaves unanswered.

CARES Act – An Employer Action Plan to Comply with Compensation-Related Provisions

Any employer considering obtaining loans, loan guarantees or payroll assistance under the CARES Act should:

  • Review the CARES Act compensation-related provisions and workforce maintenance requirements, which are summarized in further detail in the next section.
  • Identify affected officers and employees and compensation arrangements (for those employers accepting loans, loan guarantees or other relief).
    • Identify all officers and employees with total compensation in excess of $425,000 for calendar year 2019 (an “Applicable Employee”).
    • Identify all Applicable Employees with total compensation in excess of $3 million in calendar year 2019.
    • Identify last-12-months’ compensation levels for all Applicable Employees as of latest practicable date (the “LTM Compensation”).
    • Identify and review all compensation arrangements between the business and each Applicable Employee, focusing on: (1) dollar amounts; (2) guaranteed increases / guaranteed compensation; and (3) amendment and termination provisions.
    • For purposes of provisions requiring workforce and compensation/benefits maintenance, identify workforce and compensation and benefits levels as of relevant dates.
    • Identify and review collective bargaining agreements (if any).
  • Act to comply with the CARES Act compensation provisions (once the loan or loan guarantee has been executed or other relief has been received).
    • Mobilize resources to track ongoing compliance (e.g., GC / Deputy GC; CHRO or HR team leaders; stock plan administrators; benefits administrators).
    • Establish administrative framework to track compensation on a rolling 12-month basis and to track benefit levels.
    • If current LTM Compensation for any Applicable Employee exceeds maximum levels, amend any applicable agreements, plans, programs or policies to implement required reductions and obtain any required consents from any such Applicable Employee.
    • For all other plans, programs or policies between the business and an Applicable Employee, amend to include prospective cutback provisions, as needed.
    • For all new agreements with Applicable Employees, include savings language that would allow changes to compensation as may be required to comply with federal requirements without triggering any rights for the Applicable Employee (e.g., severance rights upon a “good reason” termination or breach of any such agreement).
    • Restore workforce and compensation / benefits levels as necessary to comply with workforce maintenance requirements as described below.