About a month ago, Representative Robert Hurt re-introduced into Congress an updated version of the Small Company Disclosure Simplification Act (H.R. 1965). This bill seeks to exempt emerging growth companies and issuers with total annual gross revenues of less than $250 million from the requirements to use eXtensible Business Reporting Language (XBRL) for financial statements and other mandatory periodic reporting filed with the Securities and Exchange Commission (SEC). XBRL standardizes the way companies communicate and present business information by applying computer readable tags to information across public financial documents.
Making changes to your equity plan is not an overnight process. This laborious task involves many internal and external parties and several steps along the way. It will take some time to determine a proposal of changes and evaluate what is best for your company and your employees. It is critical to develop an equity plan that is attractive to top talent, but it is essential to keep in mind any cost prohibitions, communication challenges, and ongoing maintenance. Below are some common changes companies make to their equity plans, as well as various impacts on accounting and information to help you determine how your employees will be affected.
Whether you are a U.S. based or global company, one question remains constant – is your equity compensation enhancing employee loyalty and motivation? Participant perception is such an integral element to stock plan success, and it is also one that remains difficult to quantify. Fidelity Stock Plan Services conducted a third installment of its participant research survey and reported the results in comparison to survey results from years past. The findings illustrate the trends in participant attitudes toward equity compensation plans.
Finalized in April 2007, Internal Revenue Code section 409A regulates the tax treatment of nonqualified deferred compensation, whether paid to executives or any employee. Under Section 409A, a stock option that is granted with an exercise price less than the fair market value of the common stock determined as of the option grant date requires the companies to withhold applicable income and employment taxes at the time of option vesting. This immediate taxation can be avoided by pricing the stock options at fair market value at the time of granting.
Offering an employee stock purchase plan provides your company with the opportunity to implement a broad-based equity program that is a benefit to all employees. An ESPP is an attractive opportunity to employees – from the discounted stock purchase price to the simplified enrollment through pre-determined payroll deductions. Implementing an ESPP offers significant value to employees and there are 5 reasons why your company should consider designing a plan today.
On April 29, 2015, the Securities and Exchange Commission (the “Commission”) voted to propose rules requiring public companies to disclose in a clear manner the relationship between executive compensation and the financial performance of the registrant. The proposed disclosure would be required in proxy statements in which executive compensation disclosure pursuant to Item 402 of Regulation S-K is required. The proposal is meant to supplement current disclosure requirements with a factual description of how executive compensation that is actually paid in a particular year relates to financial performance.
Performance based equity awards offer companies a transparent and effective way to align executive compensation to corporate performance. Per the Dodd Frank Act and Say-on-Pay, shareholders have become increasingly more involved in commenting on executive compensation, and performance awards illustrate the direct relationship of pay to performance. Watch this video from Pamela Greene, Member of the law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., as she discusses key elements of performance awards.
One of the main purposes of XBRL requirements is data transparency for investors. In order to make it easier for investors, and peer companies, to translate the interactive data filings, the SEC provides readers with a Rendering Engine. The SEC’s Rendering Engine allows investors to view the interactive data filings (XBRL tagging) that public companies are required to file. In this article, we have outlined a few of the changes the SEC recently made to the functionality of the Rendering Engine.