Compensation Committee - How Is Your Organization Managing Your Global Equity Compensation Risk? CPE and Support 4/10/2017.

Transcription

1 Compensation Committee - How Is Your Organization Managing Your Global Equity Compensation Risk? April 2017 The presentation will begin shortly. Learn Live Customer Support at: (888) or BDOonline_support@learnlive.com BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. CPE and Support CPE participation requirements to receive CPE credit for this webcast: You ll need to actively participate throughout the program. Be responsive to at least 75% of the participation pop-ups. Please refer to the CPE & Support handout in the Handouts section for more information about group participation and CPE certificates. Technical Support: If you should have technical issues, please contact LearnLive: Click on the Live Chat icon under the Support tab, OR call: Q&A: Submit all questions using the Q&A feature on the lower right corner of the screen. At the end of the presentation, the presenter(s) will review and answer all questions submitted. *Please note that questions and answers submitted/provided via the Q&A feature are visible to all participants as well as the presenters. Audio: Audio will be streamed through your computer speakers. If you experience audio issues during today s presentation please dial into the teleconference: , teleconference code: # 2 1

2 Moderator AMY ROJIK Partner, BDO Center for Corporate Governance and Financial Reporting Presenters DEAN FEALK Partner DLA Piper CISCO PALAO-RICKETTS Partner DLA Piper JESSICA PANCAMO Senior Manager BDO Global Compensation and Equity

3 Learning Objectives Become familiar with types of equity awards that are used more frequently on a global basis and why those may differ from the types of awards used in the US Recognize key legal considerations for structuring compensation arrangements that involve global equity awards Recognize key taxation considerations when operating in various foreign jurisdictions that may impact tax planning and compensation structuring Apply key tax-planning apps/tools to be leveraged as conversation starter for management and the board around global equity awards 5 Agenda Common Types of Equity Compensation in the US US Equity Plans How Do They Translate Globally? What About Foreign Company Equity Plans How Do They Translate in the US? Legal Considerations What Tools Are Available? 6 3

4 Poll Please indicate which of the following represents your primary industry area of focus for the organization(s) you serve. Select ALL that apply? 1. Consumer Business & Restaurants 2. Financial Services or Private Equity 3. Gaming, Hospitality & Leisure 4. Government Contracting & Healthcare 5. Life Sciences & Technology 6. Manufacturing, Distribution & Natural Resources 7. Non-Profit & Education 8. Real Estate & Construction 7 Poll For those who serve on a board or boards, please indicate the types of boards you serve. Select ALL that apply: Public companies Private companies Non-Profit companies Other N/A 8 4

5 Common Types of Equity in the US Many US companies utilize equity as the largest part of their Total Executive Compensation program. Objectives of Equity Compensation Align management compensation with shareholders Drive long-term management thinking Common Equity Compensation Vehicles Stock Options Restricted Stock Awards Attract and retain key employees Allow employees to participate in the success of the company Restricted Stock Units Phantom Units Employee Stock Purchase Plans 9 Outbound: How Does US Equity Translate? Why Commonly Used in the US? Taxation Ease of administration Employee familiarity Legal implications Considered market norm Global Implications Often different for NQ, RSAs and Phantom Data privacy, additional reporting, etc. Varies Depends on the country Depends on the country 10 5

6 Inbound: What About Foreign Equity to US Employees How Do They Translate in the US? Comes with its own challenges: Internal Revenue Code Section 409A US tax law is lacking in addressing other types of equity US has strict and swift tax withholding requirements Federal and Blue Sky Securities implications Valuation 11 So What Do Global Companies Do? Most global companies find that RSUs and/or Phantom Units are the easiest type of equity compensation to use around the world. Taxation is similar Vesting/taxation point is known and can be planned for Employee doesn t receive anything but a promise until vest, therefore no dry tax Can be settled in cash or shares Can have time or performance vesting conditions 12 6

7 Legal Considerations US securities laws Private Companies Rule 701 and Blue Sky Securities Public Companies Disclosures in public SEC filings S-8 Registrations Governance Audit Committee and internal controls Compensation Committee duties Untenable consequences of things going awry Tax gross-up Restatements of Financial Statements Backdating of 2000 s Unhappy NEOs 13 International Legal Considerations 14 7

8 Tools Available to Ease the Burden Taxation Topic Solution BDO Global Equity Rewards Matrix Administration Accounting Legal implications Market Benchmarking Mobile Employee Tracking BDO and DLA Piper Software providers DLA Piper Global Equity Team Various global compensation consultants (e.g., Mercer) DLA Piper Global Equity Team 15 BDO s Global Equity Rewards Matrix BDO s Global Equity Rewards Matrix App is currently available to download for free on IOS, Windows, and Android phones:

9 Questions 17 Resources 18 9

10 The BDO Center for Corporate Governance and Financial Reporting A dynamic and searchable on-line resource for board of directors and financial executives AN INCREDIBLE RESOURCE AT YOUR FINGERTIPS The BDO Center for Corporate Governance and Financial Reporting was born from the need to have a comprehensive, online, and easy-to-use resource for topics relevant to boards of directors and financial executives. We encourage you to visit the Center often for up-to-date information and insights you can rely on. What you will find includes: Thought leadership, practice aids, tools, and newsletters Technical updates and insights on emerging business issues Three-pronged evolving curriculum consisting of upcoming webinars and archived self-study content Opportunities to engage with BDO thought leaders External governance community resources Finally, a resource center with the continual education needs of those charged with governance and financial reporting in mind! To begin receiving notifications regarding BDO publications and event invitations (live and web-based), visit and create a user profile. If you already have an account on BDO s website, visit the My Profile page to login and manage your account preferences For more information about BDO s Center for Corporate Governance, please go to 19 BDO Board Governance Webinars For a complete listing of BDO events, refer to: Upcoming Programs: Quarterly Technical Update (Q1 2017) April 11, 12, & 13, 2017 Reducing the Burden of Sox Compliance April 25, 2017 ASC 606, Revenue for Contracts with Customers May 18, 2017 Applying the New Revenue Standard (Part 1) June 8, 2017 Applying the New Revenue Standard (Part 2) June 15, 2017 Recent Archived Webinars: Trump, Legislation and Taxes: How the Expected Tax Reform May Impact Global Organizations March 2017 Tax Planning for Executive Compensation March 2017 What Boards Need to Know About Cybersecurity (But May Be Afraid to Ask) March 2017 Are You Ready to Comply with the New Lease Accounting Standard? February 2017 Establishing an Effective Vendor Audit Program February 2017 Boards as Catalysts for Intrapreneurship and Innovation February 2017 Quarterly Technical Update (Q4 2016) January 2017 What s on the Minds of Boards November 2016 Board Collaboration: Leveraging Communication Tools and Technology October 2016 Countering Corruption What Does ISO Mean for Anti-Bribery Risk Management September 2016 Financial Instruments Update Credit Losses and Recognition & Measurement September 2016 Navigating the Rising Tide of Cybersecurity Regulation How Is Your Board Preparing? July 2016 Quarterly Technical Update (Q2 2016) July

11 BDO Board Governance Publications For a complete listing of BDO publications, refer to: Global Equity Rewards Matrix International Tax Consequences for Equity Compensation AICPA Issues SAS 132 on Going Concern SEC Rule and Form Amendments Applicable to Emerging Growth Companies FASB Updates Presentation of Pension and Other Postretirement Benefit Plan Costs BDO 2017 Shareholder Meeting Alert Topic 606, Revenue from Contracts with Customers BDO Knows: Cybersecurity Audit Committee Requirements Practice Aid Significant Accounting & Reporting Matters Q Audit Committee Round Up SEC Year in Review: Significant 2016 Developments Accounting Year in Review 2016 Audit Committee Alert: Emphasis and Focus on Controls BDO 600 Executive Compensation CEO and CFO Pay Practices SEC Requests Comments on Management, Certain Security Holders, and Corporate Governance Disclosure Requirements BDO Knows Cybersecurity Alert BDO Revenue Recognition Practice Aids Topic 606, Revenue from Contracts with Customers BDO s Approach to Audit Quality SEC Proposes to Eliminate Outdated and Redundant Disclosure Requirements 2016 IPO Halftime Report SEC Proposes Amendments to Smaller Reporting Company Definition SEC Adopts Rules Requiring Resource Extraction Issuers to Disclose Payments to Governments PCAOB Issues Staff Guidance for Audit Firms Filing the New Form AP CAQ Questions on Non-GAAP Measures A Tool for Audit Committees 21 Evaluation We continually work to improve our programming and appreciate constructive feedback. As you print your CPE certificate, please consider responding to a brief evaluation. Following the program, we will send a thank you containing additional resources for your consideration. Thank you in advance for your participation

12 Conclusion Thank you for your participation. Certificate Availability If you participated the entire time and responded to at least 75% of the polling questions, click the Participation tab to access the Print Certificate button. Please exit the interface by clicking the red X in the upper right hand corner of your screen. 23 Presenter Biographies 24 12

13 Biography Dean Fealk Partner Dean Fealk advises leading multinational companies on a wide range of legal and strategic issues related to doing business overseas. Dean leads the Global Equity Practice at DLA Piper. He frequently serves as managing international legal counsel for multi-jurisdictional and multi-disciplined projects and matters implicating corporate, securities, regulatory, tax, labor, foreign exchange and data privacy. Dean has considerable experience in cross-border equity-based compensation programs and international employment matters in Asia, Europe, Latin America, the Middle East and Africa. Cisco Palao-Ricketts Partner cisco.palao-ricketts@dlapiper.com Cisco Palao-Ricketts is experienced in advising start-up, emerging growth and public companies regarding compensation and employee benefits issues. His practice includes counseling on: equity compensation, including incentive stock options (ISOs) and nonqualified stock options (NSOs), restricted stock, stock unit awards, stock appreciation rights, employee stock purchase plans (ESPPs), profits interests and phantom equity arrangements all types of compensation and employee benefits issues that arise in M&A, spin-offs and other complex corporate transactions, including with respect to executive retention and post-transaction employee transition matters 25 Biography Jessica Pancamo Senior Manager jscuster@bdo.com Jessica has been a consultant in the firm s Compensation and Benefits practice for more than 10 years. She has assisted a variety of BDO clients with director, executive and employee compensation design projects, employee benefits and related tax compliance issues for both companies and individuals. Jessica has consulted in areas such as qualified and nonqualified retirement plans, the design of management short-term and long-term incentive programs, as well as provided compensation consulting services to executives and directors of a number of publicly-traded companies. She has advised executives and directors on executive compensation issues such as design of total rewards packages, pay for performance compensation, how programs may be perceived by institutional shareholders, requests for shareholder approval of plans, merger planning, due diligence and compliance and much more. Jessica assumes the critical role as Chair of BDO s Global Equity Team, leading a team that provides international consulting services related to international equity compensation, taxation planning and developing compensation design materials throughout BDO international offices. She serves as the engagement lead coordinator for many of BDO International s global equity clients