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 amount (if any) paid for
ISS Issues October 2024 Update to its Executive Compensation Policies FAQs
In October, Institutional Shareholder Services (“ISS”) released an off-cycle update to its Executive Compensation Policies Frequently Asked Questions (the “FAQs”), which are available at this link: US-Compensation-Policies-FAQ.pdf (the new questions are highlighted in yellow). As described in more detail below, the updates to the FAQs address ISS’s criteria for recognizing “robust” clawback policies and realizable
Interaction between COBRA and Medicare in C-Suite Executive Severance and Retirement Arrangements
Both companies and their C-suite executives should be mindful of the interactions between COBRA and Medicare and their implications when negotiating a severance or retirement arrangement. This is because Medicare enrollment can terminate COBRA coverage, depending on the timing of when an executive elects COBRA and when they enroll in Medicare, and because an executive
[Podcast]: Activism and EBEC
In this episode of The Proskauer Benefits Brief, David Teigman, partner in the Tax Department and a member of the Employee Benefits & Executive Compensation Group, Josh Apfelroth, partner in the Private Equity and Mergers & Acquisitions Group and Nick LaSpina, senior counsel in the Employee Benefits and Executive Compensation Group discuss shareholder activism in the public company context and more specifically within the framework of executive compensation. Because executive compensation can be a hot‑button topic for shareholders and can be implicated in a variety of activist situations, be sure to tune in for the latest insights into these matters.
Glass Lewis and ISS Announce Updates For 2024 Proxy Season
Glass Lewis (“GL”) recently released its annual Benchmark Policy Guidelines for 2024. This update makes several changes to how the proxy advisory firm will evaluate company policies related to executive compensation. Institutional Shareholder Services (“ISS”) also released updates to its voting policies for 2024, including new and updated responses to its Compensation Policies FAQ.
Option Grant Practices: A Trap for the Unwary – Spring-Loading and Bullet-Dodging
A potentially overlooked but important issue that public companies should have in mind when granting option or option-like awards is avoiding the unintentional appearance of “spring-loading” and “bullet-dodging,” both of which have been a recent focus of the SEC and shareholders and viewed as potentially poor corporate governance practices.
“Spring-loading” is when a public company grants option or option-like awards shortly before the release of positive material nonpublic information, which is expected to increase the company’s stock price. The grantee of a spring-loaded award immediately benefits from the increase in the stock price. For example, if stock options are granted with an exercise price of $10 per share before market trading, and a positive earnings release causes the stock price to close the same day at $15 per share, each option would already be $5 in-the-money.
The converse of spring-loading is “bullet-dodging,” which is when a public company grants option or option-like awards shortly after the release of negative material nonpublic information, which is expected to decrease the company’s stock price. Again, the grantee immediately benefits from the decrease in the stock price. For example, if stock options are scheduled to be granted before market trading with an exercise price of $15 per share, but the grant is made after a negative earnings release, or more significantly if it is delayed until after the negative earnings release, and the stock price has since closed at $10 per share, the company would have avoided granting options that would each be $5 out-of-the-money.
Tax Court Decision Interprets Profits Interest “Safe Harbor” under IRS Rev. Proc. 93-27
The Tax Court’s May 3, 2023, decision in ES NPA Holding, LLC v. Commissioner (T.C. Memo 2023‑55), upholding a taxpayer’s position to characterize a partnership interest as a profits interest under the “safe harbor” of IRS Revenue Procedure 93-27 (as clarified by IRS Revenue Procedure 2001-43), provides helpful guidance to issuers of profits interests, including private equity funds and other investment partnerships and their portfolio companies.
[Podcast]: Rep and Warranty Insurance and Executive Compensation and Employees Benefits
In this episode of The Proskauer Benefits Brief, David Teigman, partner in the Employee Benefits and Executive Compensation Group, Simon Sharpe, partner and member of our Private Equity and Mergers & Acquisitions groups and Nick LaSpina, senior counsel in the Employee Benefits and Executive Compensation Group discuss rep and warranty insurance (RWI) in the mergers and acquisitions context. They also focus on certain aspects of this insurance product as it relates to executive compensation and employee benefits matters. For the last 10 years, we have only seen the use of this insurance product proliferate, so be sure to tune in as these issues will continue to be highly relevant in any transactional practice.
Proxy Season Greetings: ISS and Glass Lewis Announce Policy Updates Ahead of the 2023 Proxy Season
Proxy advisory firms Institutional Shareholder Services (“ISS”) and Glass Lewis (“GL”) each published their annual policy updates for 2023, which updates made certain changes relating to executive compensation.[1] As a general matter, the changes are incremental to the existing policies and do not significantly change the rubric by which ISS and GL review compensation
Final SEC Clawback Rules: Key Dates that Issuers Need to Know
On November 28, 2022, the Securities and Exchange Commission (the “SEC”) published the final clawback rules (the “Final Rules”) under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in the Federal Register.
Now that the Final Rules have been published in the Federal Register, issuers should be aware of the following key