Executive & Equity Compensation

OVERVIEW

EXPERIENCE

NEWS & INSIGHTS

ACCOMPLISHMENTS

Maintain and grow your competitive edge with strategic and legally compliant compensation arrangements.

Sound executive compensation arrangements are critical for attracting the right talent and rewarding performance. Done right, they encourage company growth, increase productivity, and drive engagement. In the design of these arrangements, companies must also be concerned with controlling costs and maximizing profits, avoiding adverse publicity, and keeping pace with ever-changing tax and securities laws.

HOW WE HELP

Our Executive & Equity Compensation team approaches executive compensation matters both strategically and technically to ensure that each client’s business needs are met within the applicable legal frameworks. We understand the importance of effective compensation plans and practices in helping businesses attract and motivate leaders, senior managers, and other key employees. Our Executive & Equity Compensation attorneys have diverse backgrounds in related fields, from serving as in-house counsel, to working in accounting firms and the consulting industry. As a result, we are well-positioned to provide clients with workable solutions to their equity and executive compensation issues, from executive transition, equity compensation, and change-in-control protection, to management retention initiatives, performance incentive plans, and more.

We work closely with management and their non-legal advisors to craft appropriate employment, retention, and separation agreements for each client’s particular situation. We give due consideration to the competing needs of quickly “closing the deal” and protecting the company against overcompensating non-productive or culturally mismatched executives. Drawing upon our firm’s strengths in the employment law field, we draft concise documents that clearly reflect the economic agreement of the parties and also deal with the legal aspects such as restrictive covenants and clawbacks for misconduct.

We can help clarify the goals for innovative incentive compensation programs, define performance objectives, structure them to meet compliance requirements, and place strategic limits on the benefits payable under them.

Our team has represented some of the largest and most well-known public companies engaged in industries such as manufacturing, retail, health care, insurance, and financial services. We also routinely represent closely held businesses, which have unique equity and executive compensation considerations given the lack of a public market for their equity, and tax-exempt organizations. As such, our attorneys are experienced in partnering with these businesses to find practical solutions.

OUR SERVICES

We offer a comprehensive approach to equity and executive compensation matters. We have found that it does not necessarily serve the best interest of clients to look at each issue in a vacuum. Many compensation issues are interrelated, so we employ a holistic approach to the assessments we make and the counsel we provide. Our services include:

Equity Compensation. Vital to all companies competing for top talent, equity compensation is an important component of providing appropriate performance incentives and rewarding exceptional performance. We design and implement broad-based and executive-level equity compensation plans, including incentive stock option and nonqualified stock option plans, restricted stock and restricted stock unit awards, performance shares, and stock appreciation rights plans, as well as employee stock ownership plans. Although we do not give accounting advice, our practitioners are also familiar with the critical accounting policies associated with equity compensation plan design and operation, including issues raised by net exercises, performance-based awards, option modifications, and repricings.

Nonqualified Deferred Compensation. Perhaps the biggest advantage of nonqualified deferred compensation plans is the ability for executives to accumulate meaningful retirement benefits in light of restrictive limits under traditional tax-qualified profit-sharing and pension plans. We regularly represent clients in designing nonqualified deferred compensation programs, including make-whole plans that replace benefits not received due to tax-qualified plan limits, elective deferred compensation plans, supplemental executive retirement plans, and rabbi trusts. We understand that effective compensation planning requires a strategy that meets a client’s needs, while accommodating continual change in tax, ERISA, labor, employment, corporate, securities, and stock exchange rules, as well as accounting principles. We focus on practical and legal ways to provide flexible access to nonqualified deferred compensation prior to retirement without running afoul of Code Section 409A, Code Section 457 (in the context of tax-exempt organizations), constructive receipt rules, and potential ERISA pitfalls.

SEC Compliance. SEC regulations on executive compensation, especially those affecting post-employment payments and Compensation Discussion and Analysis (CD&A), present companies with ever greater challenges when determining how to handle disclosure requirements. Seyfarth’s Executive Compensation team works with clients to help ensure regulatory compliance without compromising the integrity of privileged information. We also assist clients with crafting communication pieces, executive summaries, the CD&A, SEC filings (including Form 8-K), and other proxy disclosures. Our executive compensation and securities law practices are coordinated to ensure that a client’s policies, procedures, and disclosures are in full compliance with all technical requirements of applicable rules and regulations of the SEC and the national securities exchanges.

EXPERIENCE

Conducted an audit and evaluation for client preparing for a change in control and a complete overhaul of its executive compensation programs; redesigned compensation programs and helped redesign and implement new stock option and restricted stock programs, a supplemental retirement plan, a deferred compensation plan, a management annual bonus plan, and new change in control agreements for the top executives. We also prepared all aspects of the S-8 registration statement.
Worked with a client’s new board of directors to implement new SERPs, equity awards, change-in-control agreements, director deferred compensation plans, and assessed the content, scope, and timing of SEC filings and disclosures. This work was required under client's emergence from cross-border creditor protection proceedings, and its subsequent listing on the NYSE and TSX.
Worked with a publicly-traded company to implement a program to permit executives to defer a portion of base salary and bonuses. In addition, the company wanted to provide a “restoration” account for these executives to make up the amount of matching contributions that were not made to the company’s qualified 401(k) plan due to IRS limits on compensation, 401(k) deferrals, and certain nondiscrimination testing. We worked with a third-party provider to design the program and assisted them in dealing with plan administration issues, including tax-withholding rules. We prepared the plan document, the executive summary and the rabbi trust agreement, and assisted the third-party administrator with employee communications and election forms.
Prepared the original omnibus equity compensation plan for a new public company. As part of the process, we counseled on the appropriate share reserve and the appropriate mix of PSUs, RSUs, and options. We also counseled the client through the necessary disclosures and prepared model award agreements.
Conducted the initial CEO pay ratio determination for a high-profile NASDAQ listed company. Our work included establishing the framework for selecting the median employee, as well as using our data analytics department to actually identify the company’s median employee. We then prepared the required pay ratio disclosure for the company’s proxy.
Guided a manufacturing company in bringing all of its executive compensation programs into compliance with Code Section 409A. Our team analyzed a multitude of employment, severance, change-in-control, bonus, equity compensation, fringe benefits, and deferred compensation plans and agreements. We presented the board with various alternatives to restructure the arrangements so as to remedy inconsistencies in definitions of “good reason” and “change in control,” eliminate “deadwood” provisions, and achieve compliance. As a result, all of the client’s programs were brought into compliance with Code Section 409A, while avoiding six-month payment delays, and the appropriate level of fairness in the terms and conditions of the agreements was restored.
Drove the exit and severance process for a company’s entire C-Suite. As part of the process, we negotiated severance amounts that were far less than budget. We also ran the onboarding of the new executive management team, including preparing and negotiating the employment agreements.
Represented a client in a large public company merger. We prepared the required retention documents, analyzed the financial impact of the change-in-control agreements, and addressed the Code Section 280G modified cap implications.
Structured a private company as a holding LLC and operating corporation to provide senior management profits interests in the holding company. Doing so allowed for meaningful equity incentives, while maintaining management’s status as Form W-2 employees of the operating company.
Worked with large tax-exempt hospitals and higher-education clients on developing comprehensive programs to compensate their executives through the use of short- and long-term incentive plans (e.g., LTIPs), 457 (b) and (f) plans, developing unique substantial risk of forfeiture vesting rules that accommodate executives at different levels and ages, all while avoiding or minimizing the impact of Code Section 409A and the new Code Section 4960 excise tax on annual executive compensation in excess of $1 million.

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Maintain and grow your competitive edge with strategic and legally compliant compensation arrangements.

HOW WE HELP

OUR SERVICES

EXPERIENCE

Conducted an audit and evaluation for client preparing for a change in control and a complete overhaul of its executive compensation programs; redesigned compensation programs and helped redesign and implement new stock option and restricted stock programs, a supplemental retirement plan, a deferred compensation plan, a management annual bonus plan, and new change in control agreements for the top executives. We also prepared all aspects of the S-8 registration statement.
Worked with a client’s new board of directors to implement new SERPs, equity awards, change-in-control agreements, director deferred compensation plans, and assessed the content, scope, and timing of SEC filings and disclosures. This work was required under client's emergence from cross-border creditor protection proceedings, and its subsequent listing on the NYSE and TSX.
Worked with a publicly-traded company to implement a program to permit executives to defer a portion of base salary and bonuses. In addition, the company wanted to provide a “restoration” account for these executives to make up the amount of matching contributions that were not made to the company’s qualified 401(k) plan due to IRS limits on compensation, 401(k) deferrals, and certain nondiscrimination testing. We worked with a third-party provider to design the program and assisted them in dealing with plan administration issues, including tax-withholding rules. We prepared the plan document, the executive summary and the rabbi trust agreement, and assisted the third-party administrator with employee communications and election forms.
Prepared the original omnibus equity compensation plan for a new public company. As part of the process, we counseled on the appropriate share reserve and the appropriate mix of PSUs, RSUs, and options. We also counseled the client through the necessary disclosures and prepared model award agreements.
Conducted the initial CEO pay ratio determination for a high-profile NASDAQ listed company. Our work included establishing the framework for selecting the median employee, as well as using our data analytics department to actually identify the company’s median employee. We then prepared the required pay ratio disclosure for the company’s proxy.
Guided a manufacturing company in bringing all of its executive compensation programs into compliance with Code Section 409A. Our team analyzed a multitude of employment, severance, change-in-control, bonus, equity compensation, fringe benefits, and deferred compensation plans and agreements. We presented the board with various alternatives to restructure the arrangements so as to remedy inconsistencies in definitions of “good reason” and “change in control,” eliminate “deadwood” provisions, and achieve compliance. As a result, all of the client’s programs were brought into compliance with Code Section 409A, while avoiding six-month payment delays, and the appropriate level of fairness in the terms and conditions of the agreements was restored.
Drove the exit and severance process for a company’s entire C-Suite. As part of the process, we negotiated severance amounts that were far less than budget. We also ran the onboarding of the new executive management team, including preparing and negotiating the employment agreements.
Represented a client in a large public company merger. We prepared the required retention documents, analyzed the financial impact of the change-in-control agreements, and addressed the Code Section 280G modified cap implications.
Structured a private company as a holding LLC and operating corporation to provide senior management profits interests in the holding company. Doing so allowed for meaningful equity incentives, while maintaining management’s status as Form W-2 employees of the operating company.
Worked with large tax-exempt hospitals and higher-education clients on developing comprehensive programs to compensate their executives through the use of short- and long-term incentive plans (e.g., LTIPs), 457 (b) and (f) plans, developing unique substantial risk of forfeiture vesting rules that accommodate executives at different levels and ages, all while avoiding or minimizing the impact of Code Section 409A and the new Code Section 4960 excise tax on annual executive compensation in excess of $1 million.