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  • Stock options won't go the way of the Dodo Bird

    header_StockOptionsArentDodos

    Dan Walter, Performensation

    An August 27, 2013, there was an article in the Wall Street Journal titled “Last Gasp for Stock Options?” The writer, Emily Chasan, starts the article with this sentence: “Stock options are on the verge of extinction.” Since Emily just came out and said it, I won't bury the lead either.

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  • Real Pay, Realizable Pay, Pay Ratios and Reality


    Dan Walter, Performensation

    Pay ratios are the most commonly used tool when discussing the unfairness between executive pay and that of the rank and file. Recently, on the PayScale Career News blog which caters to individuals managing their careers, there was an article showing CEO-worker pay ratios at several well-known companies. Ratios like 1,034:1 (Walmart) and 0:1 (Google) are attention grabbers. The question is whether this tells all, or even a significant portion, of the real story.

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  • Equity Compensation – Restricted Stock Units (RSUs), Downside Protection with a Couple Downsides

    Stickman - equity compensation - rsu
    Dan Walter, Performensation

    Last month I covered Restricted Stock Shares (RSS), today’s post covers Restricted Stock Units (RSUs). Where RSS and Stock Options are cousins, RSS and RSUs are siblings. RSS is the older sibling, with more years and experience under its belt. RSUs are the new little sister who came by surprise and often gets more attention than seems to be required. RSUs were seldom used before they shot into the spotlight following the Dotcom crash of 1999-2000. Initially, they were used to replace underwater stock options and slow the use of plan shares approved by shareholders. They provided some protection against a decrease in stock price and used somewhere between 25-50% of the shares require to provide the same value as stock options. They quickly became a major component of the equity compensation toolbox.

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  • The Seven Deadly Sins of Executive Compensation

    Stickman - 7 deadly sins of exec comp
    Dan Walter, Performensation

    Most of the problems with executive compensation tend to originate within a few categories. I have attempted to summarize these and look forward to the compensation community adding their take on this topic. Look at your past mistakes and issues. Did they start with one of these seven categorical errors?

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  • Equity Compensation – Restricted Stock Shares, Always a Great Tool, Sometimes

    Stickman - Equity Compensation - RSS
    Dan Walter, Performensation

    Restricted Stock Shares (RSS), often called Restricted Stock Awards (RSA) or even more simply Restricted Stock, have been used longer than any other equity compensation instrument. Companies have used variations of restricted stock for almost as long as stock has existed. While ISOs and NQSOs are “appreciation only” awards, RSSs are Full Value Awards (FVA). RSS awards are unique in that they require the issuance of real stock as of the date of the award. Restricted Stock is a confusing term since it can refer to at least three major categories of stock. 1) Stock issued prior to registration with the SEC under the 1933 Act; 2) Stock issued to affiliates of the company who are subject to Rule 144 filings; 3) Stock that must meet time and/or performance conditions before it can be freely transferred. For the sake of this post, I will only cover the last of these.

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  • CFO Corner: What the Heck is Realizable Pay (and why you need to know…now)

    Stickman - Realizable Pay
    Dan Walter, Performensation

    In the good old days, determining total compensation was fairly easy. Always wrong, but easy. For any given year you just added up what you paid people in base pay, what you expected to pay them in bonuses, other cash incentives, and the Fair Value (or a reasonable equivalent) of equity at the time it was granted. Public companies disclosed this information and shareholders were left to make their own projections from there. There has been a fairly rapid movement to a measurement called “realizable pay” (the current/recent value of outstanding pay). This metric may also be combined with “realized pay” (the value of exercised or otherwise delivered pay) in an attempt to provide a more accurate picture of total compensation and its alignment to company performance.

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  • CFO Corner – Non-Qualified Stock Options Are Much Better Than They Sound

    Stickman - NQSOS are better than they sound
    Dan Walter, Performensation

    Non-Qualified Stock Options (NQSOs, NQs, NSOs) should really be called Stock Options. Non-qualified (or non-statutory) makes them sound negative. The negative modifier simply refers to the fact that these stock options have no special section dedicated to them in the IRS tax code. Like Incentive Stock Options (ISOs), NQSOs are generally appreciation-only instruments. Unlike like ISOs, if the plan and local rules allow, they can be granted at price less than Fair Market Value (FMV). Although ISOs get most of the press, NQSOs are more commonly granted.

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  • CFO Corner: UK Shareholder Spring was Barely a Fling

    Stickman UK Shareholder Spring

    Dan Walter, Performensation

    In recent presentations I have heard several compensation professionals from the UK refer to their “Shareholder Spring” of 2012. The reference is to the raising of voices from shareholders. While we all love a little hyperbole, I believe that their Shareholder Spring was barely a fling. The UK’s Shareholder Spring led to a lot of posturing, but as of yet, the player and rules of the game are still familiar.

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  • CFO Corner: Equity Compensation – The Ups and Downs of ISOs

    Stickman ups and downs of isos
    Incentive Stock Options are a great place to start talking about equity compensation. ISOs are “appreciation-only” vehicles, meaning they have direct value to employees only if the stock price appreciates above the initial grant price. Other common appreciation-only instruments include NQSOs and SARs (to be covered in future posts). If you understand ISOs, you can easily understand other appreciation instruments.

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  • CFO Corner: Beyond TSR (Total Shareholder Return)

    Stickman Beyond TSR

    Dan Walter, Performensation

    Executive Pay that Works for Shareholders and Companies

    Like Milli Vanilli in 1990, Total Shareholder Return (TSR) is currently all the rage in executive compensation plans. And, like Milli Vanilli, as entertaining as TSR is to some, it may prove to be a less than stellar performer for most. Of course, unlike the disgraced pop-stars, TSR is unlikely to disappear from view any time soon.

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