영문목차

List of Questions=xxix

CHAPTER 1. Fundamental Concepts of Executive Compensation=1-1

Total Compensation Issues=1-1

Base Salary=1-11

Incentive Plans=1-13

Tax Considerations=1-19

Accounting Considerations=1-23

CHAPTER 2. Building a Total Compensation Strategy=2-1

General Considerations=2-1

Factors Determining Total Compensation Strategy=2-3

Benefit Programs Addressed in Total Compensation Strategy Statement=2-5

Other Issues=2-8

Determining the Mix=2-9

Developing a Total Strategy=2-12

Approval and Implementation=2-12

Examples of Strategy Statements=2-14

CHAPTER 3. Defining the Executive Job and Employment Terms=3-1

Executive Job Descriptions=3-1

Employment Terms=3-6

Executive Turnover=3-14

CHAPTER 4. Identifying and Evaluating Executive Candidates=4-1

Sources of Executive Talent=4-1

Interviewing Executives=4-6

Employing the Executive=4-10

CHAPTER 5. Base Salary=5-1

Establishing Base Salary=5-1

Salary Ranges and Salary Banding=5-4

Job Evaluation=5-7

Salary Increases=5-10

CHAPTER 6. Deferred Compensation Overview=6-1

General Considerations=6-1

Tax Considerations=6-5

Funding Arrangements=6-44

ERISA and SEC Considerations=6-47

CHAPTER 7. Executive Employment Agreements=7-1

General Considerations=7-1

Employment Contracts=7-2

Severance Contracts=7-6

Retirement Contracts=7-16

CHAPTER 8. Non-Equity-Based Annual Incentive Plans=8-1

General Considerations=8-2

Plan Design=8-10

Performance Measures=8-21

Performance Standards=8-26

Funding Incentive Plans=8-28

Other Design Considerations=8-32

CHAPTER 9. Non-Equity-Based Long-Term Incentive Plans=9-1

Overview=9-1

Performance Unit Plans=9-2

Formula Plans=9-4

Book Value Plans=9-6

Book Value Appreciation Plans=9-6

Book Value Purchase Plans=9-8

Economic Profit Plans=9-10

Plan Comparisons=9-13

Plan Design=9-15

CHAPTER 10. Equity-Based Incentive Plans=10-1

General Definitions and Considerations=10-2

Stock Option Purchase Plans=10-8

Incentive Stock Options=10-9

Nonqualified Stock Options=10-18

Discounted Stock Options=10-23

Premium Stock Options=10-26

Reload Options=10-28

Performance-Based Stock Options=10-30

Indexed Stock Options=10-32

Stock Appreciation Rights=10-32

Full-Value Stock Award Plans=10-39

Restricted Stock=10-40

Performance Shares=10-43

Plan Design and Administration Issues=10-47

Other Issues Related to Equity Compensation=10-63

Exhibit 1. "Say on Pay" Advisory Vote Resolution Contained in a Company Proxy Statement for 2011=10-72

Exhibit 2. "Say on Frequency" Vote Found in a Company's 2011 Proxy Statement Filed with the SEC=10-74

CHAPTER 11. Supplemental Executive Retirement Plans=11-1

General Considerations=11-1

Qualified Retirement Plans=11-2

Nonqualified Deferred Compensation Plans=11-4

Tax Considerations=11-9

Funding Arrangements=11-18

Split-Dollar Life Insurance=11-24

Trends=11-33

CHAPTER 12. Supplemental Life and Disability Coverage=12-1

CHAPTER 13. Perquisites=13-1

General Considerations=13-1

Types of Perquisites=13-2

Tax and Accounting Impact=13-9

Executive Compensation-Fringe Benefits Audit Techniques Guide (02-2005)=13-13

CHAPTER 14. Special Early Retirement Programs=14-1

Overview=14-1

Severance Programs=14-2

Planning Early Retirement Programs=14-3

CHAPTER 15. Severance Plans and Arrangements=15-1

General Considerations=15-1

CHAPTER 16. ERISA Aspects of Deferred Compensation Plans=16-1

ERISA Considerations=16-1

Pension Protection Act of 2006 Considerations=16-8

CHAPTER 17. Small-Company Versus Large-Company Practices=17-1

General Considerations=17-1

Annual Incentives=17-4

Long-Term Plans=17-8

Benefits and Perquisites=17-13

Special Considerations for Small Companies=17-16

New Venture Businesses=17-19

CHAPTER 18. Publicly Traded Company Issues=18-1

General Considerations=18-2

Stock-Based Plans=18-3

S Corporations=18-6

SEC Regulations=18-9

Proxy Rules=18-18

Tax Deductibility=18-45

CHAPTER 19. Executive Compensation in the Not-for-Profit Organization=19-1

General Considerations=19-1

Base Salary=19-4

Annual Incentives=19-6

Long-Term Incentives=19-7

Benefits=19-8

Perquisites=19-15

CHAPTER 20. Executive Compensation in the Public Sector=20-1

Philosophy=20-1

Base Salary=20-2

Annual and Long-Term Incentives=20-6

Benefits and Perquisites=20-7

Miscellaneous=20-9

CHAPTER 21. Executive Compensation in High-Technology and Start-Up Companies=21-1

Stock Options=21-1

Other Benefits=21-10

Trends=21-11

CHAPTER 22. Compensation for Division Executives=22-1

General Considerations=22-1

Base Salary=22-3

Annual Incentives=22-4

Long-Term Incentives=22-7

Benefits and Perquisites=22-13

CHAPTER 23. Compensation for Temporary Executives=23-1

General Considerations=23-1

Elements of Compensation=23-4

Federal Protection=23-7

Conversion to Full-Time Status=23-7

Litigation=23-11

Key Cases=23-15

CHAPTER 24. U.S. Executives Working Overseas=24-1

General Strategy Considerations=24-1

Premiums and Allowances=24-8

Tax Considerations=24-14

Special Compensation=24-18

Foreign Law Considerations=24-25

CHAPTER 25. Compensation for Boards of Directors=25-1

General Considerations=25-1

Outside Directors vs. Inside Directors=25-7

Compensation of Outside Directors=25-7

Compensation Methods=25-13

Benefits and Perquisites=25-15

CHAPTER 26. Executive Compensation in Banks=26-1

CHAPTER 27. Executive Compensation Practices During a Restructuring=27-1

Overview=27-1

Base Salary=27-10

Short-Term Incentives=27-12

Long-Term Incentives=27-16

Benefits and Perquisites=27-20

CHAPTER 28. Administration and Communication of Executive Compensation=28-1

Recording Executive Pay Information=28-1

Establishing Executive Pay Administration=28-8

External Reporting of Executive Pay=28-12

Communicating Pay Plans to Executives=28-15

CHAPTER 29. Trends in Executive Compensation=29-1

Total Cash Compensation=29-1

Long-Term Compensation=29-15

Outside Directors=29-50

CHAPTER 30. Executive Compensation in Privately Held Subchapter S and/or LLC Organizations=30-1

Subchapter S Corporation=30-1

Limited Liability Company=30-3

Comparing Executive Compensation in C-Corps, S-Corps, and LLCs=30-5

APPENDIX A. Executive Position Descriptions=A-1

Chairman of the Board=A-1

Chief Executive Officer=A-1

Top Operations Officer=A-2

Top Financial Officer=A-3

Top Human Resources Officer=A-4

Top Legal Officer=A-4

Top Information Technology Officer=A-5

Top Planning Officer=A-6

Top Public Relations Officer=A-7

Division or Strategic Business Unit Officer=A-7

Top Sales and Marketing Officer=A-8

Top Sales Officer=A-9

Top Marketing Officer=A-10

Controller=A-10

Top Tax Officer=A-11

Treasurer=A-12

Top Engineering Officer=A-12

Top Research and Development Officer=A-13

Top Distribution Officer=A-14

Top International Officer=A-14

APPENDIX B. Sample Employment and Severance Agreements=B-1

Hewlett-Packard Company Léo Apotheker Employement Agreement=B-1

Yahoo! Hilary Schneider Severance Agreement=B-15

APPENDIX C. Sample Annual Non-Equity Incentive Plan=C-1

Performance Award and Cash Bonus Plan of Transocean Ltd. (As Established January 1, 2009)=C-1

APPENDIX D. Sample Long-Term Incentive Plan=D-1

Philips Long-Term Incentive Plan=D-1

APPENDIX E. Sample Equity Compensation Plans=E-1

Peet's Coffee & Tea, Inc. 2010. Equity Incentive Plan=E-1

E. I. du Pont de Nemours and Company Equity and Incentive Plan=E-27

APPENDIX F. Sample Stock Purchase Plans=F-1

Apple Inc. Amended Employee Stock Purchase Plan (Effective as of November 10, 2009)=F-1

APPENDIX G. Sample Supplemental Executive Retirement Plan=G-1

Citadel Broadcasting Corporation Supplemental Executive Retirement Plan=G-1

APPENDIX H. IRS Model Rabbi Trust Arrangement=H-1

Revenue Procedure 92-64, 1992-2 C.B. 422-Rabbi Trust Arrangements=H-1

Revenue Procedure 92-65, 1992-2 CB 428-Rulings on Unfunded Deferred Compensation Arrangements=H-13

APPENDIX I. 409A Plans-Operational Correction and Document Correction ; Section 409A Court Decisions=I-1

Correction Procedures=I-1

Operational Failure Corrections=I-2

Document Compliance Corrections=I-2

Court Decisions=I-2

IRS Chief Counsel Memorandum=I-2

APPENDIX J. Sample Executive Severance Plan=J-1

Motorola Solutions, Inc. 2011 Executive Severance Plan=J-1

APPENDIX K. Sample Proxy Disclosures=K-1

APPENDIX L. Sample SEC Form 8-K Disclosures=L-1

Acxiom Corp.=L-1

NALCO Holding Co.=L-5

Sothebys=L-5

APPENDIX M. Code Section 162(m) : Recent Cases and IRS Rulings=M-1

Final Regulations―March 31, 2015=M-1

Final Regulations―September 2014=M-1

Freedman v. Adams (58 A.3d 414 (Del. 2013))=M-1

Proposed Regulations―April 2, 2013=M-2

IRS Revenue Ruling 2012-19=M-2

Proposed Regulations―June23, 2011=M-2

Office of Chief Counsel Internal Revenue Service Memorandum AM 2009-006=M-3

IRS Revenue Ruling 2008-13=M-3

IRS Notice 2008-94=M-4

IRS Notice 2007-49=M-4

Shaev v. Datascope Corp. (320. F.3d 373 (3d Cir. 2003))=M-7

Letter Ruling 200727008=M-8

Letter Ruling 200511007=M-8

Letter Ruling 200027012=M-9

Letter Ruling 9950021=M-9

Letter Ruling 9949014=M-9

Letter Ruling 9942012=M-9

Letter Ruling 9928015=M-10

Letter Ruling 9928014=M-10

Letter Ruling 9924007=M-10

Letter Ruling 9921032=M-10

Letter Ruling 9910011=M-11

Letter Ruling 9811029=M-11

Letter Ruling 9801043=M-11

Chief Counsel Advice 9926030=M-12

APPENDIX N. Code Section 280G : Cases and IRS Rulings=N-1

IRS Notice 2008-94=N-1

Letter Ruling 200607006=N-1

Revenue Ruling 2005-39 (2005-27 I.R.B.1)=N-2

Letter Rulings 200036024-200036027, 200036031, 200036032, 200036034, 200036035, and 200036037=N-2

Letter Ruling 9949009=N-2

Letter Ruling 9943032=N-3

Letter Ruling 9905012=N-3

Letter Ruling 9822029=N-3

Letter Ruling 9610022=N-4

Hemingway v. United States, 81 F. Supp. 2d 1163 (C.D. Utah 1999)=N-4

Sullivan v. Easco Corp., 662 F. Supp. 1396 (D. Md. 1987)=N-4

Worth v. Huntington Bancshares, Inc., 43. Ohio St. 3d 192, 540. N.E.2d 249 (1989)=N-5

Cline v. Commissioner, 34 F.3d 480 (7th Cir. 1994)=N-5

Golden Parachute Audit Techniques Guide (02-2005)=N-5

APPENDIX O. Sample Compensation Plans for Outside Directors=O-1

Arch Chemicals, inc. 1999 Stock Plan for Non-Employee Directors=O-1

APPENDIX P. Sample Deferred Compensation Plans=P-1

Molycorp, Inc. Nonemployee Director Deferred Compensation Plan Effective January 13, 2011=P-1

INDEX=IN-1

List of Questions

Chapter 1. Fundamental Concepts of Executive Compensation

Total Compensation issues

Q 1:1. What is total remuneration?=1-1

Q 1:2. How does base salary meet the needs of executives and the company?=1-2

Q 1:3. How do annual incentives and long-term incentives meet the needs of executives and the company?=1-2

Q 1:4. How do benefits and perquisites meet the needs of executives and the company?=1-2

Q 1:5. How do companies express the value of the elements of executive compensation?=1-3

Q 1:6. What is total cash compensation?=1-4

Q 1:9. What is total compensation?=1-4

Q 1:8. What are some of the factors that affect total compensation?=1-5

Q 1:9. How does job responsibility affect total compensation?=1-5

Q 1:10. How does job level within the organization affect total compensation?=1-6

Q 1:11. How does the type of industry affect total compensation?=1-6

Q 1:12. How do supply and demand influence total compensation?=1-7

Q 1:13. How does company size influence total compensation?=1-8

Q 1:14. How does company performance affect total compensation?=1-9

Q 1:15. Does executive performance affect total compensation?=1-10

Base Salary

Q 1:16. Does geographic location affect an executive's base salary?=1-11

Q 1:17. How are the other components of total compensation for executives related to base salary?=1-12

Q 1:18. How is base salary used to determine the mix of total compensation?=1-12

Incentive Plans

Q 1:19. What is the rationale for having an incentive plan?=1-13

Q 1:20. Are annual incentive plans appropriate for all types of organizations?=1-14

Q 1:21. What characteristics identify organizations for which annual incentive plans are feasible?=1-14

Q 1:22. How can companies deal with executives' focusing on the short term at the expense of long-term performance in their efforts to receive high annual bonuses?=1-14

Q 1:23. What is the typical relationship between annual and long-term incentives?=1-15

Q 1:24. What are some basic guidelines for incentive plan design?=1-15

Q 1:25. Who is typically eligible for incentive plan participation?=1-16

Q 1:26. How do executive compensation programs differ in emerging or start-up companies?=1-17

Q 1:27. How does corporate philosophy affect the method of compensation chosen?=1-17

Q 1:28. What are the objectives of long-term incentive plans?=1-17

Q 1:29. What is the difference between annual incentive plans and long-term incentive plans?=1-18

Q 1:30. Are stock plans considered incentive plans?=1-18

Tax Considerations

Q 1:31. What are the general tax implications of different forms of compensation?=1-19

Q 1:32. What is unreasonable compensation?=1-19

Q 1:33. What happens if an executive's compensation is deemed unreasonable?=1-20

Q 1:34. Are there limitations on compensation deductions?=1-20

Q 1:35. What is ordinary income?=1-21

Q 1:36. What are capital gains?=1-21

Q 1:37. What is the rationale for favorable long-term capital gains treatment?=1-21

Q 1:38. How do tax rates affect executive compensation planning?=1-21

Q 1:39. What is the effective tax rate?=1-22

Q 1:40. What is the marginal tax rate?=1-22

Q 1:41. What is the alternative minimum tax?=1-22

Accounting Considerations

Q 1:42. What are the general accounting implications of the different forms of compensation?=1-23

Q 1:43. What accounting statements contain compensation expenses?=1-23

Q 1:44. Is there special accounting treatment of stock awards?=1-23

Q 1:45. How does determination of compensation cost differ for nonpublic companies under Topic 718?=1-24

Q 1:46. What is the history of FAS 123R?=1-24

Q 1:47. What stock plans are included in FAS Topic 718?=1-27

Q 1:48. How is the fair value calculated under FAS Topic 718?=1-28

Q 1:49. How do the fair value determination models work for liability awards?=1-29

Q 1:50. What are the footnote disclosure requirements of Topic 718?=1-29

Q 1:51. What are the FASB guidelines on earnings per share calculations that are to be used in company financial statements?=1-29

Chapter 2. Building a Total Compensation Strategy

General Considerations

Q 2:1. What is a total compensation strategy statement?=2-1

Q 2:2. What elements of executive compensation are included in a total compensation strategy statement?=2-2

Q 2:3. What are the business purposes of a total compensation strategy?=2-2

Factors Determining Total Compensation Strategy

Q 2:4. What factors determine a company's total compensation strategy?=2-3

Q 2:5. How does a company's business philosophy affect its total compensation strategy?=2-3

Q 2:6. How does a company's mission or vision statement affect its total compensation strategy?=2-3

Q 2:7. How do a company's business plans affect its total compensation strategy?=2-4

Q 2:8. How does life cycle affect a company's total compensation strategy?=2-4

Q 2:9. How do internal factors affect a company's total compensation strategy?=2-4

Q 2:10. How do external factors affect a company's total compensation strategy?=2-5

Benefit Programs Addressed in Total Compensation Strategy Statement

Q 2:11. What benefit programs should be addressed in a total compensation strategy statement?=2-5

Q 2:12. How are health care plans addressed in a total compensation strategy statement?=2-6

Q 2:13. How are retirement plans addressed in a company's total compensation strategy statement?=2-6

Q 2:14. How are life insurance and disability insurance addressed in a company's total compensation strategy statement?=2-7

Q 2:15. How are capital accumulation plans addressed in a company's total compensation strategy statement?=2-7

Other Issues

Q 2:16. Can total compensation strategies vary by company business unit?=2-8

Q 2:17. Can total compensation strategies be developed for international businesses?=2-8

Determining the Mix

Q 2:18. How can a company determine the proper mix of executive compensation elements in a total compensation strategy statement?=2-9

Q 2:19. How should companies define competitive labor markets?=2-9

Q 2:20. Should all companies establish a total compensation strategy to pay at the 50th percentile of labor market competitors?=2-10

Q 2:21. How can a company decide on the type of short-term incentive?=2-10

Q 2:22. How can companies decide on the best type of long-term incentive?=2-11

Developing a Total Strategy

Q 2:23. What should be included in a total compensation strategy statement?=2-12

Approval and Implementation

Q 2:24. Who should approve a total compensation strategy?=2-12

Q 2:25. How should a total compensation strategy be communicated to executives?=2-13

Examples of Strategy Statements

Q 2:26. What is an example of a total compensation strategy statement for a small company?=2-14

Q 2:27. What is an example of a total compensation strategy statement for a large company?=2-15

Q 2:28. What is an example of a total compensation strategy statement in an entrepreneurial, high-growth company?=2-16

Q 2:29. What is a "tally sheet" and how is it used?=2-17

CHAPTER 3. Defining the Executive Job and Employment Terms

Executive Job Descriptions

Q 3:1. Are job descriptions necessary for executives?=3-1

Q 3:2. What is the format of a good executive job description?=3-2

Q 3:3. What managerial skills should be included in an executive job description?=3-3

Q 3:4. What business Unction skills or competencies (technical skills) should be included in an executive job description?=3-4

Q 3:5. What non-technical skills should be included in an executive job description?=3-4

Q 3:6. How can the information in an executive job description be used in screening candidates for a position?=3-4

Q 3:7. What alternatives are there to executive job descriptions?=3-6

Employment Terms

Q 3:8. What decisions should be made on the terms of employment for an executive position?=3-6

Q 3:9. How should a company evaluate a candidate's request for employment terms that exceed those planned by the company?=3-7

Q 3:10. How should direct compensation be established for executive positions?=3-8

Q 3:11. How should benefits be established for executive positions?=3-9

Q 3:12. How should supplemental benefits and perquisites be established for executive positions?=3-9

Q 3:13. What are typical relocation benefits for executive positions?=3-11

Q 3:14. When should severance be considered in the employment terms for an executive position?=3-11

Executive Turnover

Q 3:15. How can job descriptions and terms of employment be used to avoid executive turnover?=3-14

Q 3:16. How is the cost of executive turnover calculated?=3-15

Q 3:17. What are other ways to reduce executive turnover?=3-16

CHAPTER 4. Identifying and Evaluating Executive Candidates

Sources of Executive Talent

Q 4:1. What resources are commonly used to find executive talent?=4-1

Q 4:2. What are the advantages and disadvantages of the common recruiting resources?=4-2

Q 4:3. What process do search firms use to find qualified executive candidates?=4-3

Q 4:4. What process do contingency firms use to find qualified executive candidates?=4-4

Q 4:5. What process do hourly paid recruiters use to find qualified executive candidates?=4-5

Q 4:6. What process do companies use to establish an employee referral resource for finding qualified executive candidates?=4-5

Q 4:7. What process do companies use to establish a business associate referral resource for finding qualified executive candidates?=4-6

Interviewing Executives

Q 4:8. What questions should an interviewer ask on the job duties of an executive position?=4-6

Q 4:9. What questions should an interviewer ask on the skills and competencies of executive candidates?=4-7

Q 4:10. What questions should an interviewer ask on the personality traits of executive candidates?=4-7

Q 4:11. How can an interviewer best evaluate whether an executive candidate will function in the company environment?=4-8

Q 4:12. What is executive profiling?=4-8

Q 4:13. How does a profile differ from a psychological assessment?=4-10

Employing the Executive

Q 4:14. How can profiling information be used in making a hiring decision?=4-10

Q 4:15. How can information from executive interviews be used to make hiring decisions?=4-11

Q 4:16. What should be included in the executive offer letter?=4-12

Q 4:17. How much negotiation should there be over the total compensation in the offer letter to a new executive?=4-14

Q 4:18. What preparations should be made for the newly hired executive's first day of employment?=4-15

Q 4:19. How can a new executive be quickly assimilated into the organization?=4-16

Q 4:20. When should the compensation of a newly hired executive be reviewed?=4-16

Q 4:21. Should the executive be provided with an employment contract?=4-16

Chapter 5. Base Salary

Establishing Base Salary

Q 5:1. How is an executive's base salary determined?=5-1

Q 5:2. What is the impact of job scope in establishing executive base salary levels?=5-2

Q 5:3. How are executive base salary levels established when there is no labor market data available on similar positions?=5-2

Q 5:4. How can companies deal with the inequity that is created when a new executive is hired with a base salary that is higher than the base salary of similar level executives within the company?=5-3

Q 5:5. If a company uses salary ranges for executives, where should executive base salary levels be set within these salary ranges?=5-3

Salary Ranges and Salary Banding

Q 5:6. How do companies establish salary ranges for executives?=5-4

Q 5:7. How do companies assign executive positions to salary ranges?=5-5

Q 5:8. How do companies classify executive positions into a salary range when labor market values for positions with similar internal value vary considerably?=5-5

Q 5:9. Is there an alternative to base salary ranges for executives?=5-5

Q 5:10. What are the advantages of salary banding?=5-6

Q 5:11. What are the disadvantages of salary banding?=5-6

Job Evaluation

Q 5:12. What is job evaluation?=5-7

Q 5:13. How does the ranking system work?=5-8

Q 5:14. How does the point factor system work?=5-8

Q 5:15. How does the factor comparison system work?=5-9

Salary Increases

Q 5:16. Do merit increases motivate executives?=5-10

Q 5:17. Is there an alternative to merit pay increases?=5-10

Q 5:18. What experience have companies had with economic pay increases?=5-10

Q 5:19. How do companies determine salary increases when most executives are at the top of their salary range?=5-11

Q 5:20. Are there reasons for paying base salary increases that are above competitive medians or salary ranges?=5-11

Q 5:21. How does a company's pay philosophy affect salary increases?=5-12

Q 5:22. What are the differences between the executive goals used to determine salary increases and the executive goals used to determine annual incentives?=5-12

Chapter 6. Deferred Compensation Overview

General Considerations

Q 6:1. Can compensation and benefits be deferred outside of a qualified retirement plan?=6-1

Q 6:2. What are the primary approaches to deferring compensation?=6-1

Q 6:3. What is a nonqualified deferred compensation plan?=6-2

Q 6:4. What do nonqualified deferred compensation plans typically provide?=6-2

Q 6:5. What is the rationale for creating nonqualified deferred compensation plans for executives?=6-3

Q 6:6. What are the typical objectives of the executive in deferring income under a nonqualified deferred compensation plan?=6-3

Q 6:7. What are the typical objectives of the company in providing a nonqualified deferred compensation plan?=6-3

Q 6:8. Who can generally benefit under a nonqualified deferred compensation plan?=6-3

Q 6:9. Are there different types of nonqualified deferred compensation plans?=6-4

Q 6:10. What factors must be considered by a company in determining the appropriateness of a deferred compensation plan?=6-4

Tax Considerations

Q 6:11. How are nonqualified deferred compensation plans treated for tax purposes?=6-5

Q 6:12. Are contributions made pursuant to a nonqualified deferred compensation plan includible in an employee's income under the constructive receipt doctrine?=6-5

Q 6:13. Are contributions made pursuant to a nonqualified deferred compensation plan includible in the employee's income under the economic benefit doctrine?=6-5

Q 6:14. How does Code Section 83 apply to property transfers to an employee in exchange for the performance of services?=6-6

Q 6:15. What are the tax consequences of a Code Section 457 plan?=6-6

Q 6:16. When are deferred compensation arrangements subject to FICA and FUTA taxes?=6-8

Q 6:17. What effect does Code Section 409A have on deferred compensation for executives?=6-10

Q 6:18. What other provisions of the American Jobs Creation Act of 2004 have a tax effect on nonqualified deferred compensation?=6-33

Q 6:19. What provisions of the Emergency Economic Stabilization Act of 2008 have a tax effect on nonqualified deferred compensation?=6-35

Q 6:20. What provisions of the American Recovery and Reinvestment Act of 2009 have a tax effect on nonqualified deferred compensation?=6-35

Q 6:21. What provisions of the Patient Protection and Affordable Care Act have a tax effect on nonqualified deferred compensation?=6-37

Funding Arrangements

Q 6:22. What is a rabbi trust?=6-44

Q 6:23. What is a rabbi escrow agreement?=6-46

Q 6:24. What is a secular trust?=6-46

Q 6:25. What are the major differences between a secular trust and a rabbi trust?=6-47

Q 6:26. Can life insurance be used by an employer to fulfill its promise to an employee?=6-47

ERISA and SEC Considerations

Q 6:27. What are the general ERISA requirements for a nonqualified deferred compensation plan?=6-47

Q 6:28. Is a nonqualified deferred compensation plan a security subject to Securities and Exchange Commission registration?=6-48

Chapter 7. Executive Employment Agreements

General Considerations

Q 7:1. What are the various types of executive contracts?=7-1

Q 7:2. How does a company select the type of executive contract to use?=7-2

Employment Contracts

Q 7:3. What are the advantages and disadvantages of using an employment contract?=7-2

Q 7:4. What are the typical terms of an employment contract?=7-2

Q 7:5. Are non-compete clauses enforceable?=7-4

Q 7:6. Are customer non-solicitation clauses enforceable?=7-4

Q 7:7. Are employment contracts enforceable?=7-5

Severance Contracts

Q 7:8. What is a golden parachute?=7-6

Q 7:9. What is a silver parachute?=7-6

Q 7:10. What is a tin parachute?=7-6

Q 7:11. How is a change of control defined?=7-6

Q 7:12. What are the advantages and disadvantages of golden parachutes?=7-8

Q 7:13. What government regulations affect golden parachute payments?=7-8

Q 7:14. What are payments "in the nature of compensation?"=7-9

Q 7:15. Who is a disqualified individual?=7-9

Q 7:16. When do the golden parachute tax rules apply?=7-10

Q 7:17. What is an excess parachute payment?=7-11

Q 7:18. Are certain types of payments not considered parachute payments?=7-11

Q 7:19. What are payments "contingent" on a change of control?=7-12

Q 7:20. How is the excess parachute payment calculated?=7-12

Q 7:21. Are certain types of payments not contingent on a change of control but still considered parachute payments?=7-13

Q 7:22. How are stock options treated for parachute payment purposes?=7-14

Q 7:23. Are parachute payments subject to tax withholding?=7-14

Q 7:24. Is there a way to avoid the 20 percent excise tax on excess parachute payments?=7-14

Q 7:25. What is an example of a golden parachute payment?=7-15

Retirement Contracts

Q 7:26. What are typical provisions in a retirement contract?=7-16

Q 7:27. Why do companies use retirement contracts for executives?=7-17

Q 7:28. What are the advantages and disadvantages of retirement contracts?=7-17

Q 7:29. What is an example of an executive retirement contract?=7-18

Chapter 8. Non-Equity-Based Annual Incentive Plans

General Considerations

Q 8:1. What is an annual incentive?=8-2

Q 8:2. How prevalent are annual incentive plans?=8-3

Q 8:3. What is the rationale for having an annual incentive plan?=8-3

Q 8:4. How is eligibility for annual incentive plans typically determined?=8-4

Q 8:5. Which forms of payment are typically used in an annual incentive plan?=8-5

Q 8:6. Are annual incentive plan payments pensionable compensation?=8-6

Q 8:7. What is the tax impact of annual incentive plans on the company and the executive?=8-6

Q 8:8. What are the historical doctrines of constructive receipt and economic benefit, and how do they affect the deferral of annual incentives?=8-8

Q 8:9. What is the accounting treatment of annual incentive plans?=8-9

Q 8:10. Is shareholder approval required for annual incentive plans?=8-10

Plan Design

Q 8:11. What are the key issues in the design of an annual incentive program?=8-10

Q 8:12. What are the basic plan designs for annual incentive plans?=8-10

Q 8:13. How does a profit sharing plan operate?=8-11

Q 8:14. What are the advantages of a nonqualified profit sharing plan?=8-11

Q 8:15. What are the disadvantages of a nonqualified profit sharing plan?=8-11

Q 8:16. How does a growth or improvement plan operate?=8-13

Q 8:17. What are the advantages of a growth or improvement plan?=8-13

Q 8:18. What are the disadvantages of a growth or improvement plan?=8-13

Q 8:19. How does a target performance plan work?=8-14

Q 8:20. What are the advantages of a target performance plan?=8-15

Q 8:21. What are the disadvantages of a target performance plan?=8-15

Q 8:22. How does a peer company comparison plan operate?=8-15

Q 8:23. What are the advantages of a peer company comparison plan?=8-16

Q 8:24. What are the disadvantages of a peer company comparison plan?=8-16

Q 8:25. What are the key features of a matrix plan?=8-16

Q 8:26. What are the advantages of a matrix plan?=8-17

Q 8:27. What are the disadvantages of a matrix plan?=8-17

Q 8:28. What is a discretionary plan?=8-18

Q 8:29. What are the advantages of a discretionary plan?=8-18

Q 8:30. What are the disadvantages of a discretionary plan?=8-18

Q 8:31. Are executives categorized as U.S. expatriates included in annual incentive compensation programs?=8-18

Q 8:32. Do companies with international operations include local national executives in incentive compensation plans?=8-19

Q 8:33. Can incentive compensation plans be utilized in new ventures or start-up businesses?=8-19

Q 8:34. How can annual incentives for executives be distinguished from those for mid-level managers?=8-20

Q 8:35. What steps must be taken regarding short-term incentive plans during a merger of two companies?=8-20

Performance Measures

Q 8:36. What types of performance measures are commonly used in annual incentive plans?=8-21

Q 8:37. What are the most common quantitative performance measures?=8-21

Q 8:38. What financial performance measures are commonly used in annual incentive plans?=8-21

Q 8:39. What is earnings per share and how is it calculated?=8-22

Q 8:40. What is return on assets and how is it calculated?=8-23

Q 8:41. How is return on equity calculated?=8-23

Q 8:42. How is return on capital calculated?=8-23

Q 8:43. What non-financial performance measures are commonly used in annual incentive plans?=8-23

Q 8:44. What is the difficulty of using performance measures in annual incentive plans?=8-24

Q 8:45. How does a company decide whether its incentive programs should be based on group or individual performance?=8-24

Q 8:46. How do performance measures vary by group or organizational level?=8-25

Q 8:47. What performance measures work best for a manufacturing organization?=8-25

Q 8:48. What performance measures work best in financial institutions?=8-26

Q 8:49. Which performance measures are best for a service company?=8-26

Performance Standards

Q 8:50. What are the basic methods of comparing performance in annual incentive plans?=8-26

Q 8:51. How does the look forward approach to performance comparison work?=8-26

Q 8:52. How does the peer group approach to performance comparison work?=8-27

Q 8:53. How does the look back approach to performance comparison work?=8-27

Q 8:54. How does the percentage of profits approach to performance comparison work?=8-27

Q 8:55. Can performance maximums be set for annual incentive plans?=8-27

Q 8:56. Do companies typically establish a threshold performance level in annual incentive award plans?=8-27

Q 8:57. How can appropriate performance standards be determined?=8-28

Funding Incentive Plans

Q 8:58. How do companies determine the size of award appropriate in annual incentive compensation plans?=8-28

Q 8:59. What factors drive the amount of annual incentive awards paid to executives?=8-29

Q 8:60. How is the pool method used to determine incentive payouts?=8-30

Q 8:61. Are there advantages to the pool method?=8-30

Q 8:62. Are there disadvantages to the pool method?=8-30

Q 8:63. How is the participant method used to determine incentive pools?=8-31

Q 8:64. Are there advantages to the participant method?=8-31

Q 8:65. Are there disadvantages to the participant method?=8-31

Q 8:66. Do incentive plans have caps on incentive payments?=8-31

Other Design Considerations

Q 8:67. What other design considerations are necessary for programs that are deemed to be deferred compensation plans under Code Section 409A?=8-32

Chapter 9. Non-Equity-Based Long-Term Incentive Plans

Overview

Q 9:1. What are non-equity-based long-term incentive plans?=9-1

Performance Unit Plans

Q 9:2. What is a performance unit plan?=9-2

Q 9:3. How is the performance measure established for a performance unit plan?=9-2

Q 9:4. What is the accounting impact of a performance unit plan?=9-3

Q 9:5. What is the tax treatment of a performance unit plan?=9-3

Q 9:6. What is the typical award period for a performance unit plan?=9-3

Q 9:7. What are the advantages of a performance unit plan?=9-3

Q 9:8. Are there disadvantages to instituting a performance unit plan?=9-4

Formula Plans

Q 9:9. What is a formula plan?=9-4

Q 9:10. How is the performance measure established for a formula plan?=9-4

Q 9:11. What is the accounting impact of a formula plan?=9-5

Q 9:12. What is the tax treatment of a formula plan?=9-5

Q 9:13. What is the typical award period for a formula plan?=9-5

Q 9:14. What are the advantages of a formula plan?=9-6

Q 9:15. Are there disadvantages to instituting a formula plan?=9-6

Book Value Plans

Q 9:16. What are book value plans?=9-6

Book Value Appreciation Plans

Q 9:17. What is a book value appreciation plan?=9-6

Q 9:18. What is the accounting impact of a book value appreciation plan?=9-7

Q 9:19. What is the tax treatment of a book value appreciation plan?=9-7

Q 9:20. What are the advantages of a book value appreciation plan?=9-7

Q 9:21. Are there disadvantages to instituting a book value appreciation plan?=9-8

Book Value Purchase Plans

Q 9:22. What is a book value purchase plan?=9-8

Q 9:23. What is the accounting impact of a book value purchase plan?=9-8

Q 9:24. What is the tax treatment of a book value purchase plan?=9-9

Q 9:25. What are the advantages of a book value purchase plan?=9-9

Q 9:26. Are there disadvantages to instituting a book value purchase plan?=9-10

Q 9:27. For what type of companies does a book value purchase plan make sense?=9-10

Economic Profit Plans

Q 9:28. What does the term "economic profit" mean?=9-10

Q 9:29. How do economic profit plans work?=9-11

Q 9:30. What is shareholder value?=9-12

Q 9:31. How do shareholder value plans work?=9-12

Plan Comparisons

Q 9:32. What is the advantage of a stock option plan over a non-equity-based long-term incentive plan?=9-13

Q 9:33. What is the advantage of restricted stock over a non-equity-based long-term incentive plan?=9-13

Q 9:34. Under what circumstances is a non-equity-based long-term incentive plan better than an equity-based plan?=9-14

Q 9:35. What are the advantages of economic profit plans over stock plans?=9-14

Q 9:36. What are the advantages of economic profit plans over formula or performance unit plans?=9-14

Plan Design

Q 9:37. Is eligibility for non-equity-based plans the same as eligibility for equity-based plans?=9-15

Q 9:38. How do companies typically determine the amount to be earned from non-equity-based long-term grants?=9-15

Q 9:39. Do non-equity-based plans need to be approved by shareholders?=9-15

Q 9:40. How do non-equity-based plans determine payments on executive terminations?=9-16

Chapter 10. Equity-Based Incentive Plans

General Definitions and Considerations

Q 10:1. What are equity-based long-term incentive plans?=10-2

Q 10:2. What are the characteristics of equity-based long-term incentive plans?=10-2

Q 10:3. How is eligibility for participation in equity-based long-term plans determined?=10-3

Q 10:4. How prevalent are equity-based long-term incentive plans?=10-4

Q 10:5. What is the rationale for having an equity-based long-term incentive plan?=10-5

Q 10:6. What should be considered in selecting an equity-based long-term incentive plan?=10-5

Q 10:7. What are the principal types of equity-based long-term incentive plans?=10-7

Stock Option Purchase Plans

Q 10:8. What is a stock option plan?=10-8

Q 10:9. What are the fundamental differences between the different types of stock option plans?=10-8

Q 10:10. How are stock option exercise prices set?=10-8

Q 10:11. How long is the typical stock option exercise or award period?=10-9

Incentive Stock Options

Q 10:12. What are incentive stock options?=10-9

Q 10:13. What is the tax treatment of an ISO?=10-12

Q 10:14. What is the effect of the alternative minimum tax on the tax treatment of an ISO?=10-13

Q 10:15. What is the accounting treatment of an incentive stock option?=10-14

Q 10:16. Can ISOs have a dilutive impact in the calculation of fully diluted earnings per share?=10-14

Q 10:17. How prevalent are incentive stock options?=10-15

Q 10:18. What are the advantages of an incentive stock option?=10-16

Q 10:19. What are the primary disadvantages of an incentive stock option?=10-17

Nonqualified Stock Options

Q 10:20. What is a nonqualified stock option?=10-18

Q 10:21. How prevalent are nonqualified stock options?=10-18

Q 10:22. What is the accounting treatment of a nonqualified stock option?=10-19

Q 10:23. How does a company calculate dilution with a nonqualified stock option?=10-19

Q 10:24. What is the tax treatment of a nonqualified stock option?=10-20

Q 10:25. What are the advantages of a nonqualified stock option?=10-21

Q 10:26. What are the disadvantages of a nonqualified stock option?=10-21

Q 10:27. Can features be added to nonqualified stock options to offset the withholding and payment burdens?=10-22

Q 10:28. How do incentive stock options compare with nonqualified stock options?=10-22

Discounted Stock Options

Q 10:29. What is a discounted stock option?=10-23

Q 10:30. How prevalent are discounted stock options?=10-24

Q 10:31. What is the tax treatment of a discounted stock option?=10-24

Q 10:32. What is the accounting treatment of a discounted stock option?=10-24

Q 10:33. What are the advantages of a discounted stock option?=10-24

Q 10:34. What are the disadvantages of a discounted stock option?=10-25

Q 10:35. How deeply can discounted stock options be discounted?=10-25

Premium Stock Options

Q 10:36. What is a premium stock option?=10-26

Q 10:37. How is the premium established on a premium stock option?=10-26

Q 10:38. How prevalent are premium stock options?=10-27

Q 10:39. What is the accounting treatment of a premium stock option?=10-27

Q 10:40. What is the tax treatment of a premium stock option?=10-27

Q 10:41. What is the advantage of a premium stock option?=10-27

Q 10:42. What is the disadvantage of a premium stock option?=10-27

Reload Options

Q 10:43. What is an option reload plan?=10-28

Q 10:44. What is the accounting treatment of a reload option?=10-28

Q 10:45. What is the tax treatment of a reload option?=10-29

Q 10:46. What are the advantages of an option reload provision?=10-29

Q 10:47. What are the disadvantages of an option reload plan?=10-29

Performance-Based Stock Options

Q 10:48. What is a performance-based stock option?=10-30

Q 10:49. What is the accounting treatment of a performance-based stock option?=10-30

Q 10:50. What is the tax treatment of a performance-based stock option?=10-30

Q 10:51. What are the advantages of a performance-based stock option?=10-31

Q 10:52. What are the disadvantages of a performance-based stock option?=10-31

Indexed Stock Options

Q 10:53. Is an indexed stock option similar to a performance-based stock option?=10-32

Stock Appreciation Rights

Q 10:54. What are stock appreciation plans?=10-32

Q 10:55. What is a stock appreciation right?=10-33

Q 10:56. How do the SEC Section 16 rules affect SARs?=10-34

Q 10:57. How prevalent are SARs?=10-34

Q 10:58. Should the stock appreciation right be eliminated now that the cashless exercise is possible?=10-35

Q 10:59. What is the accounting treatment of an SAR?=10-36

Q 10:60. What is the tax treatment of an SAR?=10-37

Q 10:61. What are the advantages of an SAR?=10-37

Q 10:62. Are there disadvantages to using SARs?=10-38

Q 10:63. For what type of company does an SAR plan make sense?=10-38

Q 10:64. What are phantom shares?=10-39

Q 10:65. What is a shadow stock plan?=10-39

Full-Value Stock Award Plans

Q 10:66. What are full-value stock award plans?=10-39

Q 10:67. Why would a company choose to implement a full-value stock award plan rather than a stock option purchase plan?=10-39

Restricted Stock

Q 10:68. What is a restricted stock grant?=10-40

Q 10:69. How prevalent are restricted stock grants?=10-40

Q 10:70. What is the accounting treatment of a restricted stock grant(RSG)?=10-41

Q 10:71. What is the tax treatment of a restricted stock grant?=10-42

Q 10:72. How does a Code Section 83(b) election affect a restricted stock grant?=10-42

Q 10:73. What is the typical vesting period for a restricted stock grant?=10-43

Q 10:74. What are the advantages and disadvantages of a restricted stock grant?=10-43

Q 10:75. For what types of companies do restricted stock grants make sense?=10-43

Performance Shares

Q 10:76. What is a performance share plan?=10-43

Q 10:77. What is the tax treatment of a performance share grant?=10-44

Q 10:78. What is the accounting treatment of a performance share?=10-45

Q 10:79. What are the advantages of a performance share plan?=10-46

Q 10:80. Are there disadvantages to instituting a performance share plan?=10-46

Q 10:81. How are payout schedules established for a performance share plan?=10-46

Plan Design and Administration Issues

Q 10:82. Can the grant of stock compensation have an effect on wage and hour issues?=10-47

Q 10:83. What are the general rules regarding taxation of equity-based long-term incentive plans?=10-49

Q 10:84. What are the general rules on accounting for a long-term incentive plan award?=10-50

Q 10:85. How can companies get executives to own stock?=10-51

Q 10:86. How does the Black-Scholes option pricing model work?=10-51

Q 10:87. How should a total compensation strategy statement be utilized in plan design?=10-52

Q 10:88. How do companies typically determine the potential payout from their long-term plans?=10-54

Q 10:89. How does the salary multiple approach work?=10-54

Q 10:90. How does the targeted income approach work?=10-55

Q 10:91. What is the typical exercise period for a stock option?=10-56

Q 10:92. Under what conditions are stock options effective?=10-57

Q 10:93. Under what conditions are performance shares effective?=10-57

Q 10:94. How do companies determine the number of shares to reserve for stock option plans?=10-57

Q 10:95. What is an omnibus plan?=10-58

Q 10:96. Can payments from a performance share plan be deferred?=10-58

Q 10:97. How does the constructive receipt doctrine historically affect the deferral of performance share awards?=10-59

Q 10:98. What is the economic benefit doctrine and how does it historically affect the deferral of performance share awards?=10-59

Q 10:99. Can gains from a stock option be deferred?=10-60

Q 10:100. What are the different ways an employee can pay the exercise price of a stock option?=10-60

Q 10:101. What is a cashless option exercise?=10-60

Q 10:102. What is Regulation T, and what is its effect on executive compensation?=10-61

Q 10:103. What is a stock swap?=10-61

Q 10:104. What is pyramiding?=10-61

Q 10:105. What is the tax treatment of a stock swap or pyramiding exercise?=10-62

Q 10:106. Are there drawbacks to a pyramiding exercise or stock swap?=10-62

Other Issues Related to Equity Compensation

Q 10:107. Do current regulations allow stock options to be transferred?=10-63

Q 10:108. What effect does "backdating" of stock options have on companies?=10-63

Q 10:109. What is needed to institute an equity-based long-term incentive plan?=10-64

Q 10:110. What is needed to amend a long-term incentive plan?=10-65

Q 10:111. How do the Section 16 rules of the SEC affect stock plans and the way employees can pay for stock?=10-65

Q 10:112. What information about long-term incentive plans must be disclosed in a company's proxy statement?=10-66

Chapter 11. Supplemental Executive Retirement Plans

General Considerations

Q 11:1. Why are supplemental executive benefit plans important?=11-1

Q 11:2. How do traditional benefit programs fail executives?=11-2

Q 11:3. How do supplemental executive benefit programs fit into overall compensation?=11-2

Qualified Retirement Plans

Q 11:4. What makes a retirement plan qualified?=11-2

Q 11:5. What are the advantages of a retirement plan's being qualified?=11-2

Q 11:6. Are there limits on contributions and benefits under a qualified retirement plan?=11-3

Nonqualified Deferred Compensation Plans

Q 11:7. Can compensation and benefits be deferred outside of a qualified retirement plan?=11-4

Q 11:8. What is a nonqualified deferred compensation plan?=11-4

Q 11:9. How does a nonqualified deferred compensation plan differ from a qualified plan?=11-5

Q 11:10. What do nonqualified deferred compensation plans typically provide?=11-5

Q 11:11. What is the rationale for creating nonqualified deferred compensation plans for executives?=11-5

Q 11:12. Who can generally benefit under a nonqualified deferred compensation plan?=11-5

Q 11:13. Are there different types of nonqualified retirement plans?=11-6

Q 11:14. What factors must be considered by a company in determining the appropriateness of a deferred compensation retirement plan?=11-8

Tax Considerations

Q 11:15. How are nonqualified deferred compensation retirement plans treated for tax purposes?=11-9

Q 11:16. What is an example of the tax treatment of company contributions to a nonqualified deferred compensation retirement plan?=11-9

Q 11:17. Are contributions to a funded plan treated differently from contributions to an unfunded plan?=11-10

Q 11:18. How are employers that establish excess benefit plans treated for tax purposes?=11-10

Q 11:19. How are employees who benefit from excess benefit plans treated for tax purposes?=11-11

Q 11:20. Are contributions made pursuant to a nonqualified deferred compensation plan includible in an employee's income under the constructive receipt doctrine?=11-11

Q 11:21. Are contributions made pursuant to a nonqualified deferred compensation plan includible in the employee's income under the economic benefit doctrine?=11-11

Q 11:22. How does Code Section 83 apply to property transfers to an employee in exchange for the performance of services?=11-11

Q 11:23. What are the tax consequences of a Code Section 457 plan?=11-12

Q 11:24. When are deferred compensation arrangements subject to FICA and FUTA taxes?=11-13

Q 11:25. What effect does Code Section 409A have on deferred compensation for executives?=11-15

Q 11:26. How do the Code Section 409A rules specifically apply to SERPs and other types of nonqualified retirement plans discussed in this chapter?=11-17

Funding Arrangements

Q 11:27. What is a rabbi trust?=11-18

Q 11:28. What is a rabbi escrow agreement?=11-20

Q 11:29. What is a secular trust?=11-20

Q 11:30. What are the major differences between a secular trust and a rabbi trust?=11-21

Q 11:31. Can life insurance be used by an employer to fulfill its promise to an employee?=11-21

Q 11:32. What is the difference between a COLI contract and a retail life insurance contract?=11-21

Q 11:33. How is life insurance used by an employer to fulfill its promise to an employee?=11-22

Q 11:34. Can life insurance other than COLI be utilized to fund nonqualified deferred compensation plans?=11-22

Q 11:35. What are the advantages of using employee-owned life insurance to fund nonqualified deferred compensation plans?=11-23

Split-Dollar Life Insurance

Q 11:36. What is split-dollar life insurance?=11-24

Q 11:37. How is split-dollar life insurance treated under ERISA?=11-24

Q 11:38. How is policy splitting accomplished?=11-24

Q 11:39. Must the executive pay his or her part of the premium?=11-24

Q 11:40. What happens when the executive retires?=11-28

Q 11:41. What are the common applications of split-dollar life insurance?=11-28

Q 11:42. What problems do executives experience with group term life insurance?=11-29

Q 11:43. Why is split-dollar life insurance useful in estate planning?=11-29

Q 11:44. How can split-dollar life insurance enhance a nonqualified deferred compensation plan?=11-29

Q 11:45. How does Code Section 409A impact split-dollar insurance?=11-30

Trends

Q 11:46. What are the current trends in SERP design?=11-33

Chapter 12. Supplemental Life and Disability Coverage

Q 12:1. What level of basic group life insurance coverage do most employers provide?=12-1

Q 12:2. How is basic group-term life insurance taxed to the employee?=12-1

Q 12:3. What is a group-term carve out arrangement?=12-1

Q 12:4. What type of supplemental life insurance is offered to an executive in connection with these "carve-out" arrangements?=12-2

Q 12:5. How does a bonus insurance plan work?=12-2

Q 12:6. What is a "death benefit only" plan?=12-2

Q 12:7. How is a death benefit only plan treated under ERISA?=12-2

Q 12:8. What is "spilt-dollar" insurance?=12-3

Q 12:9. What is the purpose of an executive disability income insurance plan?=12-3

Q 12:10. What legal framework should exist to minimize taxation of executive disability plans?=12-4

Q 12:11. How are disability income benefits taxed to the executive?=12-4

Q 12:12. How are disability insurance premiums taxed to the executive and the employer?=12-4

Q 12:13. Are executive disability premiums more expensive tha LTD?=12-4

Q 12:14. Do executive disability income insurance plans have to be funded by the employer?=12-4

Chapter 13. Perquisites

General Considerations

Q 13:1. What is an executive perquisite?=13-1

Types of Perquisites

Q 13:2. What are the typical executive perquisites?=13-2

Q 13:3. How are cellular phones typically provided?=13-3

Q 13:4. How do companies structure company car programs for executives?=13-3

Q 13:5. How do companies provide country club or Iuncheon club perquisites?=13-3

Q 13:6. How are financial planning programs provided to executives?=13-4

Q 13:7. Do expense accounts for entertainment purposes have maximums?=13-5

Q 13:8. What is the typical amount of severance in a severance contract for an executive?=13-5

Q 13:9. What are typical amounts of supplemental life insurance for executives?=13-6

Q 13:10. What are typical supplemental executive retirement plan benefit amounts?=13-6

Q 13:11. How do companies conduct an analysis of executive perquisites provided in competitive companies?=13-6

Q 13:12. How are executive perquisites valued?=13-7

Q 13:13. How do companies select executive perquisites?=13-8

Tax and Accounting Impact

Q 13:14. What are the tax regulations on the reimbursement of travel expenses?=13-9

Q 13:15. What are the tax regulations on the reimbursement of entertainment expenses?=13-10

Q 13:16. What are the tax regulations on the reimbursement of club memberships?=13-10

Q 13:17. What are the tax regulations on company cars?=13-10

Q 13:18. What are the tax regulations on company payments of car or cellular phones and laptop computers?=13-11

Q 13:19. What are the tax regulations on company payments of supplemental life insurance for executives?=13-11

Q 13:20. What are the tax regulations on the executive perquisites of use of company planes and first-class travel?=13-12

Q 13:21. What are the tax regulations on the executive financial planning perquisite?=13-12

Q 13:22. What is the accounting treatment of executive perquisites?=13-13

Executive Compensation-Fringe Benefits Audit Techniques Guide (02-2005)

Chapter 14. Special Early Retirement Programs

Overview

Q 14:1. How does a special early retirement window program work under an existing retirement plan?=14-1

Q 14:2. Why do companies offer special early retirement window programs?=14-2

Severance Programs

Q 14:3. Do companies offer special severance programs along with special early retirement programs?=14-2

Q 14:4. What are the typical severance benefits offered along with special early retirement programs?=14-3

Planning Early Retirement Programs

Q 14:5. How do companies fund special early retirement programs?=14-3

Q 14:6. What, if any, are the negative consequences to companies that implement special early retirement programs, and how can these consequences be handled?=14-3

Q 14:7. Are there any negative consequences to employees who accept a special early retirement program?=14-4

Q 14:8. What are the ERISA and Internal Revenue Code implications of a special early retirement program under a qualified pension plan?=14-4

Q 14:9. Do companies require employees who elect a special early retirement benefit to sign non-compete and/or non-litigation agreements?=14-6

Q 14:10. Do companies provide medical benefits along with special early retirement programs?=14-7

Q 14:11. Are there special ERISA rules to consider if the company wants to provide an early retirement incentive program outside of a qualified retirement plan?=14-8

Chapter 15. Severance Plans and Arrangements

General Considerations

Q 15:1. What is a severance contract?=15-1

Q 15:2. How does a company select the type of severance contract to use?=15-1

Q 15:3. What is a golden parachute?=15-2

Q 15:4. What is a silver parachute?=15-2

Q 15:5. What is a tin parachute?=15-2

Q 15:6. How is a change of control defined?=15-2

Q 15:7. What are the advantages and disadvantages of golden parachutes?=15-3

Q 15:8. What government regulations affect golden parachute payments?=15-3

Q 15:9. What are payments "in the nature of compensation"?=15-4

Q 15:10. Who is a disqualified individual?=15-4

Q 15:11. When do the golden parachute tax rules apply?=15-5

Q 15:12. What is an excess parachute payment?=15-6

Q 15:13. Are certain types of payments not considered parachute payments?=15-7

Q 15:14. What are payments "contingent" on a change of control?=15-7

Q 15:15. How is the excess parachute payment calculated?=15-8

Q 15:16. Are certain types of payments not contingent on a change of control but still considered parachute payments?=15-9

Q 15:17. How are stock options treated for parachute payment purposes?=15-9

Q 15:18. Are parachute payments subject to tax withholding?=15-10

Q 15:19. Is there a way to avoid the 20 percent excise tax on excess parachute payments?=15-10

Q 15:20. What is an example of a golden parachute payment?=15-10

Q 15:21. How do the rules under Code Section 409A impact severance pay?=15-11

Chapter 16. ERISA Aspects of Deferred Compensation Plans

ERISA Considerations

Q 16:1. What are the general ERISA requirements for a nonqualified deferred compensation plan?=16-1

Q 16:2. If an employer fails to meet the ERISA "top hat" filing requirements for a nonqualified deferred compensation plan, can the situation be corrected?=16-4

Q 16:3. What are the general participation, vesting, and funding requirements for an unfunded nonqualified deferred compensation plan under ERISA?=16-5

Q 16:4. What are the general fiduciary issues under ERISA for an unfunded nonqualified deferred compensation plan?=16-5

Q 16:5. Is plan termination insurance needed for an unfunded nonqualified deferred compensation plan?=16-5

Q 16:6. For purposes of ERISA Title I, is a nonqualified deferred compensation plan generally considered funded or unfunded?=16-5

Q 16:7. What is the difference between a funded and an unfunded plan?=16-5

Q 16:8. For purposes of ERISA Title I, are plans affected by whether they are considered funded or unfunded?=16-6

Q 16:9. Does an employer inadvertently create a top-hat plan that is subject to ERISA requirements when it provides benefits to one executive under an employment contract?=16-6

Q 16:10. How does the employer pay the benefits provided by a top-hat plan?=16-6

Q 16:11. Can employer assurances be made that future benefits will be paid without subjecting employees to current taxation?=16-6

Q 16:12. Is a top-hat plan a funded or unfunded plan for purposes of Title I of ERISA?=16-7

Q 16:13. Are contributions to an unfunded top-hat plan treated differently from contributions to a funded top-hat plan?=16-7

Q 16:14. Is an excess benefit plan subject to the ERISA Title I requirements?=16-7

Q 16:15. Is an excess benefit plan subject to the participation, vesting, and funding requirements imposed by Title I of ERISA?=16-7

Q 16:16. Is an excess benefit plan subject to the reporting and disclosure requirements imposed by Title I of ERISA?=16-8

Pension Protection Act of 2006 Considerations

Q 16:17. How did the Pension Protection Act of 2006 affect executive benefits?=16-8

Chapter 17. Small-Company Versus Large-Company Practices

General Considerations

Q 17:1. How do small and large companies define executives?=17-1

Q 17:2. How do base salary levels in small companies compare with those in large companies?=17-2

Q 17:3. What are typical amounts of total cash compensation in small and large companies?=17-3

Q 17:4. How can small companies with a small human resources staff determine appropriate compensation levels?=17-4

Annual Incentives

Q 17:5. How do annual incentive amounts in small companies compare with those in large companies?=17-4

Q 17:6. What are typical targeted annual incentive amounts as a percentage of base salary in small and large companies?=17-5

Q 17:7. How are annual incentive plans structured in small and large companies?=17-6

Q 17:8. How do small companies with less sophisticated business performance measures establish annual incentives?=17-7

Q 17:9. Are design issues for annual incentive plans in small companies different than those in large companies?=17-7

Long-Term Plans

Q 17:10. How many shares, as a percentage of total shares outstanding, are reserved for executive compensation plans in small and large companies?=17-8

Q 17:11. What are the typical targeted long-term incentive amounts for small and large companies?=17-8

Q 17:12. What is the typical mix of executive compensation elements in small and large companies?=17-9

Q 17:13. How do small and large companies calculate the value of stock options?=17-11

Q 17:14. How are long-term performance plans structured in small and large companies?=17-11

Q 17:15. What form of long-term incentive is most appropriate for small companies?=17-12

Benefits and Perquisites

Q 17:16. How do executive perquisites differ between small and large companies?=17-13

Q 17:17. How are supplemental executive retirement plans typically structured in small and large companies?=17-14

Q 17:18. How are benefits different in small versus large companies?=17-15

Special Considerations for Small Companies

Q 17:19. How can small companies attract high-quality people without offering competitive base salary and annual incentive amounts?=17-16

Q 17:20. How can small companies offer competitive executive retirement plans without incurring significant costs?=17-17

Q 17:21. When and how do small, family-owned companies provide stock to non-family members?=17-17

Q 17:22. What total compensation strategies are used in small companies?=17-18

Q 17:23. How do small, high-growth companies establish competitive values on executives when these companies are doubling in size every one or two years?=17-19

New Venture Businesses

Q 17:24. What is a new venture business?=17-19

Q 17:25. How is incentive compensation structured in new venture businesses?=17-20

Q 17:26. How are base salary, benefits, and perquisites structured in new venture businesses?=17-20

Chapter 18. Publicly Traded Company Issues

General Considerations

Q 18:1. What is a public or publicly traded company?=18-2

Q 18:2. What is a private or privately held company?=18-2

Q 18:3. What is a closely held company?=18-2

Q 18:4. Is a privately held company always a closely held company?=18-2

Q 18:5. Do executive compensation programs in privately held companies differ from those in publicly traded companies?=18-2

Stock-Based Plans

Q 18:6. Do privately held companies use stock-based capital accumulation programs in their executive compensation strategy?=18-3

Q 18:7. What are the most common forms of long-term incentive in private companies?=18-4

Q 18:8. Are there problems with using stock plans in private companies?=18-4

Q 18:9. What conditions are typically included in a buy-back agreement?=18-5

Q 18:10. Is there a negative effect if a privately held company does not provide long-term incentive plans?=18-6

S Corporations

Q 18:11. What is a Subchapter S corporation?=18-6

Q 18:12. How does a company become a Subchapter S corporation?=18-6

Q 18:13. Does electing S corporation status have an impact on executive compensation?=18-7

Q 18:14. Does the issue of unreasonable compensation affect publicly traded companies differently from privately held and S corporations?=18-8

SEC Regulations

Q 18:15. What is the Securities Act of 1933, and how does it affect executive compensation?=18-9

Q 18:16. What is the Securities Exchange Act of 1934, and how does it affect executive compensation?=18-10

Q 18:17. How can a company avoid application of the 1933 Act?=18-11

Q 18:18. What are the basic rules under Section 16 of the 1934 Act?=18-11

Q 18:19. Who is an insider under the Section 16 reporting rules?=18-14

Q 18:20. What are the most significant effects of the Section 16 rules on compensation from a corporate perspective?=18-15

Q 18:21. What action must be taken to ensure that a stock option plan receives the benefits of Rule 16b-3?=18-16

Q 18:22. Can the board of directors or shareholders ratify a stock option grant after the fact?=18-18

Proxy Rules

Q 18:23. What is a shareholder proxy, and what is a proxy statement?=18-18

Q 18:24. How do the proxy reporting requirements affect executive compensation?=18-19

Q 18:25. What is a board compensation committee and what role does it play in executive compensation?=18-19

Q 18:26. What rules govern the proxy reporting requirements?=18-21

Q 18:27. What charts on executive compensation must be included in a proxy statement?=18-23

Q 18:28. How should public companies determine the future value of stock options and its effect on executive compensation?=18-25

Q 18:29. How do the "say on pay" shareholder votes work?=18-25

Q 18:30. How do the proxy reporting rules generally affect the design of executive compensation programs?=18-29

Q 18:31. How do the policies adopted by proxy advisory firms affect compensation planning?=18-30

Q 18:32. Is shareholder approval of equity compensation plans now necessary for public companies?=18-33

Q 18:33. Is a nonqualified deferred compensation plan a security subject to Securities and Exchange Commission registration?=18-38

Q 18:34. What rules on executive compensation came out of the Dodd-Frank Wall Street Reform Act?=18-40

Tax Deductibility

Q 18:35. What are the limitations on compensation deductions under Code Section 162(m)?=18-45

Q 18:36. Have executive compensation plans been changed in response to the Code Section 162(m) cap on executive pay?=18-49

Q 18:37. Are there special Code Section 162(m) rules on executive pay for TARP companies?=18-50

Q 18:38. Are there special Code Section 162(m) rules on executive pay for healthcare companies?=18-51

Chapter 19. Executive Compensation in the Not-for-Profit Organization

General Considerations

Q 19:1. What is a not-for-profit company?=19-1

Q 19:2. How does the mix of executive compensation elements differ in a not-for-profit company?=19-2

Q 19:3. How do the business objectives of executive compensation plans differ in a not-for-profit company?=19-2

Q 19:4. Does the size of the organization affect executive compensation in a not-for-profit organization?=19-3

Q 19:5. Does the type of not-for-profit organization affect the level of executive compensation?=19-4

Q 19:6. Does geographical location affect executive compensation in a not-for-profit company?=19-4

Base Salary

Q 19:7. How are base salary ranges established in not-for-profit companies?=19-4

Q 19:8. Are merit increases to base salary used in not-for-profit companies?=19-5

Annual Incentives

Q 19:9. What is the prevalence of annual incentive plans in not-for-profit companies?=19-6

Q 19:10. Does the size of the annual incentive award in a not-for-profit company differ from that in a for-profit company?=19-6

Q 19:11. What performance measures are typically used in the annual incentive plans of not-for-profit companies?=19-7

Q 19:12. How is eligibility for the annual incentive plans of not-for-profit companies determined?=19-7

Long-Term Incentives

Q 19:13. What types of long-term incentive plans are prevalent in not-for-profit companies?=19-7

Benefits

Q 19:14. What Code sections guide benefit plans in not-for-profit companies?=19-8

Q 19:15. What types of benefit plans are common for executives in not-for-profit companies?=19-15

Perquisites

Q 19:16. What types of perquisites are prevalent in not-for-profit companies?=19-15

Q 19:17. How can insurance contracts be used to provide supplemental retirement benefits to executives in a nonprofit organization?=19-16

Q 19:18. What are the requirements for establishing a bona fide severance plan as a means of supplemental retirement for executives in a not-for-profit organization?=19-17

Chapter 20. Executive Compensation in the Public Sector

Philosophy

Q 20:1. What is the philosophy behind executive compensation plans in the public sector versus that in the private sector?=20-1

Base Salary

Q 20:2. How is base salary different in a public sector organization than in a private sector organization?=20-2

Q 20:3. Are job evaluation systems used for executive positions in public sector organizations?=20-3

Q 20:4. Can merit increases to base salary work for executive positions in public sector organizations?=20-4

Q 20:5. What are the advantages and disadvantages of tenure-based pay increase systems?=20-5

Q 20:6. Why do public sector organizations prefer a tenure-based pay increase system?=20-5

Annual and Long-Term Incentives

Q 20:7. Are annual incentives used in public sector organizations?=20-6

Q 20:8. Are long-term performance plans or stock award plans used in public organizations?=20-6

Benefits and Perquisites

Q 20:9. Are insured benefits in the public sector better than those in the private sector?=20-7

Q 20:10. Are retirement plans in the public sector better than those in private companies?=20-8

Q 20:11. Can supplemental executive retirement plans be used in public sector organizations?=20-8

Q 20:12. Do public sector executives have perquisites?=20-8

Miscellaneous

Q 20:13. Are public sector organizations object to Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, or other such statutes?=20-9

Q 20:14. How can compensation plans be used to attract high-quality executives into the public sector?=20-9

Q 20:15. Can public sector executives be subject to unreasonable compensation claims?=20-9

Q 20:16. How is unreasonable compensation determined for organizations that provide service to the public sector?=20-10

Q 20:17. Do the FAR regulations of the federal government define what level of executive pay is unreasonable?=20-10

Q 20:18. What organization oversees the interpretations of FAR 31.205-6 and the determination of reasonable pay for executives in companies that contract with the federal government?=20-11

Q 20:19. Do states have regulations similar to those in the federal government?=20-11

Q 20:20. What other executive compensation problems face public sector organizations?=20-11

Chapter 21. Executive Compensation in High-Technology and Start-Up Companies

Stock Options

Q 21:1. How can companies with cash flow issues attract and retain employees?=21-1

Q 21:2. How does a company determine the number of options to grant to employees?=21-2

Q 21:3. How many option grants should be given at the time of hire?=21-2

Q 21:4. How many annual option grants should be given?=21-2

Q 21:5. For nonpublic companies, are there limits on the number of option grants that can be made without meeting a Securities and Exchange Commission registration requirement?=21-3

Q 21:6. What are the most common exemptions from the registration requirements?=21-3

Q 21:7. What types of vesting restrictions are typically placed on options being granted by pre-initial public offering companies?=21-4

Q 21:8. What other restrictions on options typically exist in pre-initial public offering companies?=21-5

Q 21:9. What special 409A considerations apply to stock options granted by pre-IPO companies?=21-5

Q 21:10. What are "underwater" options?=21-6

Q 21:11. How can companies deal with underwater options?=21-6

Q 21:12. What types of stock option exchange programs are there?=21-7

Q 21:13. How does straight repricing work?=21-7

Q 21:14. How do Securities and Exchange Commission rules affect option exchanges?=21-7

Q 21:15. What are the shareholder approval rules for employee stock option exchange programs?=21-8

Q 21:16. Can the grant of stock compensation have an effect on wage and hour issues?=21-8

Other Benefits

Q 21:17. What other types of benefits are offered by high-technology companies?=21-10

Trends

Q 21:18. What are the trends in compensation and benefits for high-technology companies?=21-11

Q 21:19. What are typical payments to Board of Director members in high-technology/start-up companies?=21-12

Chapter 22. Compensation for Division Executives

General Considerations

Q 22:1. What is a division executive?=22-1

Q 22:2. Are division executives subject to the same regulatory constraints as corporate executives?=22-2

Q 22:3. Is the compensation of a division executive included in a public company proxy if the executive is one of the five highest paid employees of the company?=22-2

Q 22:4. Are there differences in the total compensation of division executives based on degree of autonomy?=22-2

Base Salary

Q 22:5. How is base salary different for division executives?=22-3

Annual Incentives

Q 22:6. How are annual incentive amounts different for division executives?=22-4

Q 22:7. Is the mix of total cash compensation changing for division executives?=22-5

Q 22:8. Should division executives have their annual incentive determined from division or corporate results?=22-6

Long-Term Incentives

Q 22:9. How are levels of long-term incentive different for division executives?=22-7

Q 22:10. Should division executives have their long-term incentive determined from division or corporate results?=22-7

Q 22:11. How can long-term incentives be changed from stock options to incentives based on division results?=22-8

Q 22:12. What is the best way to design a payout schedule for a long-term incentive plan that is based on division results?=22-9

Q 22:13. Can value-added performance measures be used in long-term incentive plans?=22-10

Q 22:14. How is the incentive amount calculated when value-added is used as a performance measure?=22-10

Q 22:15. Can the same division-based performance measures be for an executive's annual incentive and long-term incentive?=22-11

Q 22:16. Can division-based incentive plans be used in not-for-profit organizations?=22-12

Q 22:17. Can division-based incentive plans be used in international organizations?=22-13

Q 22:18. What are the disadvantages of division-based incentive compensation plans?=22-13

Benefits and Perquisites

Q 22:19. What perquisites are typically provided to division executives?=22-13

Chapter 23. Compensation for Temporary Executives

General Considerations

Q 23:1. What is a temporary executive?=23-1

Q 23:2. Are temporary executives independent contractors?=23-2

Q 23:3. What are the advantages and disadvantages of being an independent contractor?=23-2

Q 23:4. What are the advantages and disadvantages of using temporary executives?=23-3

Q 23:5. What is the difference between a short-term and long-term temporary assignment?=23-3

Q 23:6. What is outsourcing?=23-3

Q 23:7. Are there alternatives to outsourcing, and, if so, what are they?=23-4

Q 23:8. How do temporary executives obtain assignments?=23-4

Q 23:9. Can temporary executives be placed on overseas assignments?=23-4

Elements of Compensation

Q 23:10. How is base salary determined for temporary executives?=23-4

Q 23:11. Can temporary executives be provided with incentive compensation?=23-6

Q 23:12. Are temporary executives provided with stock awards?=23-6

Q 23:13. What insurance benefits are provided to temporary executives?=23-6

Q 23:14. Are temporary executives provided with retirement benefits?=23-7

Q 23:15. Are temporary executives provided with perquisites?=23-7

Federal Protection

Q 23:16. Are temporary employees covered by federal regulations on equal pay, age, and so forth?=23-7

Conversion to Full-Time Status

Q 23:17. Can temporary executives be converted to full-time status?=23-7

Q 23:18. When a temporary executive converts to a full-time employee, what benefit issues arise?=23-7

Q 23:19. What other benefit issues arise in connection with outsourcing employees?=23-8

Litigation

Q 23:20. How do recent cases affect the temporary employee arena?=23-11

Key Cases

Q 23:21. How has case law affected the temporary employee arena?=23-15

Chapter 24. U.S. Executives Working Overseas

General Strategy Considerations

Q 24:1. What is an executive expatriate?=24-1

Q 24:2. What is a third-country national?=24-2

Q 24:3. What is a local national?=24-2

Q 24:4. What is a global remuneration pay strategy?=24-2

Q 24:5. How is a global remuneration strategy applied to local nationals, expatriates, and third-country nationals?=24-2

Q 24:6. What other strategy issues should be considered by a company and an executive in developing an executive expatriate compensation program?=24-3

Q 24:7. What are the typical elements of an executive expatriate compensation package?=24-5

Q 24:8. How are salaries established for an expatriate?=24-5

Q 24:9. How are annual incentives for expatriates established?=24-6

Q 24:10. How are long-term incentives for expatriates established?=24-6

Q 24:11. How are insured benefits for expatriates established?=24-7

Q 24:12. How are perquisites for expatriates established?=24-8

Premiums and Allowances

Q 24:13. What is a foreign service premium?=24-8

Q 24:14. What is a hardship allowance?=24-9

Q 24:15. What is a cost-of-living allowance?=24-9

Q 24:16. What is a housing allowance?=24-10

Q 24:17. Do executive expatriates receive reimbursement of any home sale or other relocation costs when they take an overseas assignment?=24-11

Q 24:18. What benefits does a company provide to executive expatriates who do not sell their homes?=24-12

Q 24:19. What is an education allowance?=24-13

Q 24:20. What is language training?=24-13

Q 24:21. What is home leave?=24-13

Tax Considerations

Q 24:22. What is tax equalization?=24-14

Q 24:23. What is tax gross-up?=24-15

Q 24:24. What is spendable income?=24-15

Q 24:25. What is the foreign earned income exclusion?=24-16

Q 24:26. How can executive expatriates avoid taxes when on overseas assignment?=24-17

Q 24:27. Can an executive expatriate avoid capital gains tax on the sale of a home while on overseas assignment?=24-18

Special Compensation

Q 24:28. Are executive expatriates protected against currency fluctuation?=24-18

Q 24:29. What is a completion bonus?=24-19

Q 24:30. Can stock options be granted to executive expatriates?=24-19

Q 24:31. What are freestanding stock appreciation rights?=24-20

Q 24:32. Can long-term bonus plans be used for executive expatriates?=24-20

Q 24:33. Can annual incentive plans be used for executive expatriates?=24-21

Q 24:34. What kinds of medical benefits are provided to executive expatriates?=24-21

Q 24:35. What happens to an executive expatriate's pension plan during the overseas assignment?=24-21

Q 24:36. How are life insurance and disability insurance benefits established for executive expatriates?=24-22

Q 24:37. What perquisites are provided to executive expatriates?=24-22

Q 24:38. What is done for executive expatriates on repatriation?=24-22

Q 24:39. What special compensation is provided to an executive expatriate who takes a second overseas assignment?=24-23

Q 24:40. What are the elements of a net-to-net compensation program?=24-24

Q 24:41. What are the typical elements of a modified home country balance sheet compensation program?=24-25

Foreign Law Considerations

Q 24:42. What is the role of income tax treaties in expatriate executive compensation?=24-25

Q 24:43. Are there employment law issues facing expatriates working in a European Union member state?=24-25

Q 24:44. Does Code Section 409A govern foreign deferred compensation plans?=24-26

Chapter 25. Compensation for Boards of Directors

General Considerations

Q 25:1. How does a company choose the members of its board of directors?=25-1

Q 25:2. What is the role of a company board of directors?=25-2

Q 25:3. What are the typical board committees and what are their roles?=25-3

Q 25:4. Do board members have to meet any specific qualifications to fulfill their responsibilities?=25-5

Q 25:5. What is a lead director?=25-6

Outside Directors vs. Inside Directors

Q 25:6. Why would a company choose to have outside directors?=25-7

Compensation of Outside Directors

Q 25:9. What are the typical elements of compensation for outside directors?=25-7

Q 25:8. Are inside directors compensated specifically for their activities as directors?=25-9

Q 25:9. How much do outside directors receive for their services?=25-9

Q 25:10. Are retirement plans still commonly established for outside directors?=25-11

Q 25:11. Are stock awards common for outside directors?=25-12

Q 25:12. Are outside directors generally provided with benefits?=25-12

Q 25:13. Do outside directors receive change-of-control benefits?=25-13

Compensation Methods

Q 25:14. How is director income taxed?=25-13

Q 25:15. In what types of performance-based plans do directors participate?=25-13

Q 25:16. How are stock awards used in compensating directors?=25-14

Q 25:17. How do the Section 16 rules apply to directors' options?=25-15

Q 25:18. Can stock options with tandem stock appreciation rights be granted to directors?=25-15

Benefits and Perquisites

Q 25:19. What other benefits are typically provided to directors?=25-15

Q 25:20. Can Keogh plans be used by outside directors?=25-15

Q 25:21. Can Keogh plans be used by inside directors?=25-16

Q 25:22. What are some new trends in board of director compensation?=25-16

Q 25:23. Do outside directors get perquisites?=25-17

Q 25:24. What percentage of companies provide outside directors with perquisites?=25-17

Q 25:25. What are some of the new challenges that outside directors face from shareholders?=25-18

Chapter 26. Executive Compensation in Banks

Q 26:1. What organizations are considered banks?=26-1

Q 26:2. What kinds of total pay strategies are used in banks?=26-1

Q 26:3. How are base salary levels determined in banks?=26-3

Q 26:4. Are base salary levels the same for similar positions with similar magnitudes of accountability in banks versus non-banks?=26-3

Q 26:5. Do banks use merit increases?=26-3

Q 26:6. What is the prevalence of annual incentives in banks?=26-5

Q 26:7. Are the levels of annual incentives in banks similar to those in non-banks?=26-5

Q 26:8. What types of annual incentive plans are used in banks?=26-6

Q 26:9. What types of performance measures are used within banking industry annual incentive plans?=26-7

Q 26:10. Do banks use stock award plans?=26-9

Q 26:11. What are typical levels of stock awards in banks?=26-10

Q 26:12. What is acceptable dilution of share ownership for an executive pay plan in a bank?=26-31

Q 26:13. Who should approve stock plans in a bank?=26-31

Q 26:14. What are the typical design issues for a stock option plan?=26-32

Q 26:15. What are the typical design issues for a restricted stock plan?=26-33

Q 26:16. What are the typical design issues for a performance share plan?=26-33

Q 26:17. Are perquisites used in the banking industry?=26-34

Q 26:18. Do banks use cafeteria perquisites?=26-35

Q 26:19. Are executive contracts used in banks?=26-35

Q 26:20. What are the typical provisions in an executive contract for a banking executive?=26-35

Q 26:21. Can bank executives be assigned overseas?=26-36

Q 26:22. When bank executives become expatriates, are there any special allowances for them beyond the typical expatriate?=26-36

Q 26:23. Do banking executives have non-qualified deferred compensation benefits?=26-36

Q 26:24. Is compensation for board members at a bank similar to that in non-banks?=26-37

Q 26:25. What are the trends in bank industry executive pay?=26-38

Chapter 27. Executive Compensation Practices During a Restructuring

Overview

Q 27:1. What is a restructuring?=27-1

Q 27:2. What are some examples of companies that have undergone restructurings?=27-1

Q 27:3. What issues must be considered when reviewing executive compensation strategy during a restructuring?=27-2

Q 27:4. What issues are unique to a restructuring involving an acquisition?=27-5

Q 27:5. What issues are unique to a restructuring involving a merger?=27-6

Q 27:6. How are levels of pay established for executives in separate business units or departments within a restructured company?=27-8

Q 27:7. If a restructured company requires executives to be transferable between business units or departments, how is its executive compensation strategy affected?=27-9

Q 27:8. How should benefits and perquisites be handled in a restructuring?=27-9

Base Salary

Q 27:9. How should executive positions be evaluated and classified for purposes of determining base salary following a restructuring?=27-10

Q 27:10. Should salary ranges be dictated by industry practices, location, or job responsibilities?=27-11

Q 27:11. Should salary administration practices be the same or different after a restructuring?=27-12

Short-Term Incentives

Q 27:12. Should eligibility for annual incentives be affected by a restructuring?=27-12

Q 27:13. Should short-term incentive plans be the same between company businesses or should they be designed to support different business unit objectives?=27-13

Q 27:14. After a restructuring, how are potential award levels determined for annual incentives?=27-13

Q 27:15. What performance measures are used by restructured companies?=27-14

Q 27:16. If different goals are used among business units after a restructuring, how can a company achieve equity in its annual incentive program?=27-15

Q 27:17. Is it possible for one business unit to have a performance target plan and another business unit to have a discretionary plan?=27-15

Q 27:18. Who should approve annual incentive payments in a restructured company?=27-16

Long-Term Incentives

Q 27:19. How are long-term incentive plans affected by a restructuring?=27-16

Q 27:20. Should long-term incentive plans be the same between business units or departments?=27-17

Q 27:21. How do restructured companies determine the size of long-term incentive awards?=27-18

Q 27:22. Is the number of shares used in long-term incentive plans, as a percentage of total shares outstanding, greater in a restructured company?=27-19

Q 27:23. Does a restructuring prompt changes in award frequency and terms in long-term incentive plans?=27-19

Benefits and Perquisites

Q 27:24. How do executive benefits and perquisites change during a restructuring?=27-20

Q 27:25. Does eligibility for executive benefits and/or perquisites change during a restructuring?=27-21

Q 27:26. What perquisites are most commonly added or improved during a restructuring?=27-21

Chapter 28. Administration and Communication of Executive Compensation

Recording Executive Pay Information

Q 28:1. Are there special recordkeeping requirements for executive base salary levels?=28-1

Q 28:2. What records should be kept on executive annual incentive awards?=28-2

Q 28:3. What are the recordkeeping requirements for a stock option plan?=28-3

Q 28:4. What are the recordkeeping requirements for a long-term performance-based plan?=28-4

Q 28:5. What are the recordkeeping requirements for a long-term performance share plan?=28-4

Q 28:6. What are the recordkeeping requirements for a restricted stock plan?=28-4

Q 28:7. What are the recordkeeping requirements for stock or book value appreciation rights and long-term formula plans?=28-5

Q 28:8. Are there special recordkeeping requirements for insured benefit plans that apply to executives?=28-5

Q 28:9. What are the recordkeeping requirements for executive perquisites or special executive benefits?=28-6

Q 28:10. How do organizations establish recordkeeping responsibilities for executive pay?=28-6

Establishing Executive Pay Administration

Q 28:11. Is salary administration different for executives versus non-executives?=28-8

Q 28:12. How are annual incentive award plans administered for executives?=28-9

Q 28:13. How are stock award plans administered for executives?=28-10

Q 28:14. How are non-stock award long-term incentive plans administered for executives?=28-10

Q 28:15. Is the administration of insured benefits different for executives versus non-executives?=28-11

Q 28:16. How are executive perquisites and supplemental executive benefits administered?=28-11

External Reporting of Executive Pay

Q 28:17. What government agencies and groups external to the organization require reports on executive pay?=28-12

Q 28:18. What are the reporting requirements of the DOL?=28-12

Q 28:19. What are the reporting requirements of the FASB?=28-12

Q 28:20. What are the reporting requirements of the IRS?=28-13

Q 28:21. What are the reporting requirements of the SEC?=28-13

Q 28:22. What are companies required to report to their shareholders?=28-14

Q 28:23. What are companies required to report to their executives?=28-14

Q 28:24. What are companies required to report to their plan administrators?=28-15

Communicating Pay Plans to Executives

Q 28:25. What is the best way to communicate executive pay information to executives?=28-15

Q 28:26. What additional forms are required to communicate stock awards to executives?=28-16

Q 28:27. What additional forms are needed for communicating long-term performance awards to executives?=28-16

Q 28:28. How do organizations perform executive pay plan administration?=28-17

Chapter 29. Trends in Executive Compensation

Total Cash Compensation

Q 29:1. How are base salary levels changing for executive positions ?=29-1

Q 29:2. How do base salary levels vary by industry for executive positions?=29-3

Q 29:3. Does the $1 million cap on the deductibility of executive pay in public companies having significant influence on executive base salary levels?=29-4

Q 29:4. How are annual bonus levels changing in companies?=29-10

Q 29:5. How are annual bonus practices changing?=29-13

Q 29:6. What changes are occurring in the mix of salary to annual incentives for executive positions?=29-14

Q 29:7. How has total direct compensation changed in recent years?=29-14

Long-Term Compensation

Q 29:8. How are stock award levels changing for executive positions?=29-15

Q 29:9. Have noncompete or "clawback" clauses been used in stock award plans?=29-18

Q 29:10. What are the key provisions of the Dodd-Frank Act in the area of executive compensation?=29-19

Q 29:11. What is the status of economic value-added plans?=29-25

Q 29:12. Is the use of reload stock features still increasing?=29-26

Q 29:13. Do many companies use stock ownership guidelines for executives and/or directors?=29-26

Q 29:14. Given trends to use both stock options and full-value grants like restricted shares or performance shares, how are companies determining how many shares to provide for various executive positions?=29-27

Q 29:15. May long-term plans provide for executive loans?=29-28

Q 29:16. Are stock cancel and reissue plans still used?=29-30

Q 29:17. What are other trends in long-term incentives?=29-31

Q 29:18. What recent rules have been issued by the Securities and Exchange Commission that impact executive pay plan design?=29-33

Q 29:19. Has the long-term capital gains tax rate increase, effective in 2012, had much impact on executive pay?=29-41

Q 29:20. Will more executives be subject to the alternative minimum tax if the use of incentive stock options increases in response to a higher ordinary income tax rate in 2013?=29-42

Q 29:21. What recent regulations and rulings have been issued by the IRS that impact executive pay?=29-43

Q 29:22. What is the Sarbanes-Oxley Act?=29-47

Outside Directors

Q 29:23. With greater use of restricted stock as well as stock options, is dilution a new issue in executive compensation that needs to be monitored by executive compensation planners?=29-50

Q 29:24. What recent guidance has been issued by Institutional Shareholder Services(ISS)?=29-50

Q 29:25. How has the accounting standards under FASB ASC Topic 718 affected executive pay programs?=29-51

Chapter 30. Executive Compensation in Privately Held Subchapter S and/or LLC Organizations

Subchapter S Corporation

Q 30:1. What is included in the definition of a Subchapter S Corporation and a Limited Liability Company?=30-1

Limited Liability Company

Q 30:2. What is a Limited Liability Corporation?=30-3

Comparing Executive Compensation in C-Corps, S-Corps, and LLCs

Q 30:3. Are salary levels different in an S-Corp or LLC, from a regular C-Corp?=30-5

Q 30:4. Are annual incentives different in an S-Corp or LLC, from a regular C-Corp?=30-5

Q 30:5. Are long-term incentive or stock award plans different in an S-Corp or LLC, from a regular C-Corp?=30-6

Q 30:6. Can executive compensation plans assist S-Corp or LLC owners in implementing an exit strategy from the business for themselves and/or for other executives?=30-8

Q 30:7. How can second generation executives in an S-Corp or LLC fund stock buyouts or retirements of the first generation of executives?=30-8

Q 30:8. How can insurance contracts be used to fund the stock buyouts or retirement of first generation executives?=30-9

Q 30:9. Can insurance contracts be used by an individual owner in an S-Corp or LLC to fund his/her exit from the business and pass on the business to a family member?=30-9

Q 30:10. What tax issues do first generation initial owners need to consider when planning to pass on the business to a second generation of executive(s)?=30-9

Q 30:11. What role can nonqualified deferred compensation plans have in an S-Corp or LLC?=30-10

Q 30:12. How does an LLC Profits Interest Plan work?=30-11

Q 30:13. How is an LLC Profits Interest Plan affected by Code Section 409A?=30-14

Q 30:14. How does a Phantom Equity Plan work for an LLC?=30-15