We are closely following the negotiations between President Obama and Congress on raising the federal debt ceiling, which includes the potential for a rise in tax rates.
If you are concerned about the impact of future tax increases on the financial planning for stock comp, see our three key articles on tax-rate planning for NQSOs, restricted stock and RSUs, and ISOs.
Below we summarize a few key recent additions or updates to the award-winning content of myStockOptions.com. A selected list
of content added and updated during the second quarter of 2011 is also available. Don't want to wait for these quarterly updates? Keep up in real time at The myStockOptions.com Blog
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Hot New Articles For Summer
In need of summer reading? To your list, you can now add three new articles at myStockOptions.com:
Stockbrokers' Secrets (Part 8): What I Tell My Clients About Their Restricted Stock And Performance Shares, by W.E.B. Bantling. Adding to his hugely popular Stockbrokers' Secrets series, our pseudonymous financial advisor applies his expertise and wit to answer six of the most common questions he receives from clients with grants of restricted stock, RSUs, or performance shares.
Stock Option Strategy To Diversify Away Your Company Stock Risk, by Robert J. Pyle. While you may have great faith in your company's stock, especially if you have acquired it through equity compensation plans, you still need to diversify your investment portfolio. With stock options, this means you must figure out the optimal times to exercise and sell. The author applies an innovative approach to this analysis.
Your Company Goes Public: How Your Stock Compensation May Change, by Ryan Harvey and Bryan Smith. The resurgent IPO market means many private companies are preparing for their market debuts and making changes in their equity compensation programs. With IPOs coming up for many fast-growing companies, including Groupon and Zynga, this article looks at some of the shifts you can expect in your stock grants both during the period leading up to the IPO and after the company goes public. (See also our FAQs on important rules for selling stock after the IPO.)
Stay Out Of Trouble: New Course, Exam, & Podcast On SEC Law
To help financial professionals, stock plan participants, and investors stay out of trouble with the SEC and criminal prosecutors, myStockOptions.com has developed a new course and exam on SEC law
. These materials are based on the extensive articles and FAQs
in the SEC Law section of myStockOptions.com. Covered topics include SEC law basics, insider trading and tipping, Rule 10b5-1 plans, the requirements under Rule 144, and the Section 16 rules. The course offers continuing education credits: 5 for CEPs and 3 for CFPs.
Meanwhile, a podcast
focuses mainly on insider trading. In an entertaining audio presentation, realistic hypothetical situations involving insider trading are discussed to explain the key misunderstandings about confidential information and stock trading that can get people into trouble with the SEC.
Noncompetes, Clawbacks, And Courts
In a stock option grant, a noncompete forfeiture provision can prevent you from exercising your options if you leave the company to work for a competitor. Over the past several years, federal courts have tended to rule in favor of noncompetes, though state courts in California have repeatedly rejected corporate noncompete provisions challenged by former employees trying to keep their stock options. Some states do favor noncompetes, however. The Texas Supreme Court
recently upheld the use of stock options as adequate consideration in exchange for a noncompete provision, reversing a previous decision in a lower court.
For more on this case, and more in general on noncompetes with stock options, see the related article
on myStockOptions.com. In addition, a few FAQs explain the basics of stock option noncompete agreements
and their often close companions clawback provisions
. You can even find out whether restricted stock grants
ever carry noncompetes and clawbacks. For those of you who deal in nonqualified deferred compensation, an FAQ
at our sister website myNQDC.com discusses whether noncompete provisions are enforceable with NQDC distributions.
IRS Proposes Regulations On The Section 162(m) Cap
Section 162(m) of the tax code limits your company's deduction for each "covered employee" to $1 million unless a senior officer's compensation over this amount meets the performance exceptions. (IRS Notice 2007-49
defines the "covered employees" as the CEO and the other three highest-paid executives, excluding the CFO.) Compensation from stock options or stock appreciation rights granted at fair market value does meet this, and performance shares usually can too, but standard time-vested restricted stock does not.
Under regulations proposed by the IRS in June 2011, company stock plans must specify the maximum number of shares that can be granted to each employee. Merely stating an aggregate maximum without this per-employee number will not fit within the performance-based exception. In addition, the proposed regulations clarify that the Section 162(m) transition rule excluding grants from the limit if the company later goes public does not apply to restricted stock units or phantom stock. These grants will not be deductible if settled or paid out after the IPO. For more details on Section 162(m), see the FAQ on myStockOptions.com.
Take Part In A Survey Of Pre-IPO Stock Grants
The National Center for Employee Ownership, along with other organizations, is now conducting what it hopes will be the largest and most representative survey to date on equity compensation in all types of privately held companies. Click here to participate in the survey.
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