To attract and retain the top professional talent, companies must establish a wide variety of compensation plans. The laws governing these compensation programs are frequently being refined and are becoming increasingly complex.
Our Executive Compensation team assists in the design, implementation and maintenance of a wide variety of executive compensation plans, including employment agreements, equity compensation programs, short and long-term incentive awards, nonqualified deferred compensation plans, supplemental retirement plans, and protections for executives in the event of a takeover or other change in control. We also help clients review and design funding vehicles for these arrangements. To manage transition upon a reduction in force, corporate restructuring or change in control, we work closely with our employment lawyers on developing executive severance arrangements. In all of these areas, we are able to use our experience in dealing with specific client issues under various tax laws (such as Sections 162(m), 280G, and 409A) to establish programs that are designed to best comply with these tax laws.
Services provided by the Executive Compensation team include:
- Counseling Concerning Impact of Section 409A
We assist client companies and their benefits consultants with restructuring the Change in Control Agreements and Severance Agreements of their senior executives. These changes involve reviewing standing agreements for conformity with the current marketplace, integrating the treatment of new plans and new types of equity awards into the agreements, and future review of the agreements for compliance with Section 409A and its complex rules affecting these types of agreements.
Code Section 409A is currently the leading challenge facing executive compensation. We actively work with clients in moderating Section 409A’s impact both on Capitol Hill and at Treasury and assist them in developing appropriate Section 409A compliance strategies for equity compensation, employment and severance agreements, traditional deferred compensation, make-up plans linked to qualified plans and welfare benefits.
For many companies, Section 409A has created the need to do a comprehensive review of their deferred compensation programs, including historical plan designs that no longer work as intended. Our team works closely with many public companies to restructure their arrangements, preserving important grandfather rights and preparing new payment election structures.
- Nonqualified Trusts
Because many supplemental executive plans involve significant compensation deferrals by executives, we are often called upon to prepare nonqualified or “rabbi” trusts to hold the deferred amounts. These trusts raise significant tax and accounting issues, particularly when the company uses its own stock to fund part of the trust. In several recent cases, we have also had to design special “change in control” provisions in the trusts to deal with post-acquisition problems.
- Equity Compensation Plans
Our Executive Compensation team works closely with our clients, their accountants, and other advisors to develop equity compensation programs for executives that blend the clients’ needs to retain executives and to provide incentives for increased performance. Increasingly, effective compensation requires innovative equity compensation programs that go beyond the executive ranks. Having worked with groundbreaking employers in this area, we can help design and implement broad-based stock purchase and stock option programs that reflect the increasing importance of equity in non-executive compensation.
- International Benefits
More than ever, businesses are operating in a worldwide market and have learned the competitive advantage of offering equity compensation and other benefits on a multinational basis. In assisting clients with international executive compensation benefits plans, we draw on our experience with global compensation and benefits issues and our relationships with leading employment and compensation firms around the world.
Our team advises clients on the establishment, geographic expansion, and day-to-day operation of multinational equity compensation arrangements, including stock options and qualified employee stock ownership plans. We coordinate closely with Kilpatrick Townsend’s employment lawyers to address “acquired rights” issues and the other challenges of international employment law. We regularly advise clients on the coordination of employee benefits for executives who are transferred to or from the U.S.