(The following post originally appeared on ONSecurities, a top Minnesota legal blog founded by Martin Rosenbaum to address securities, governance and compensation issues facing public companies.)
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, signed by President Obama on December 17, extended existing tax rates through 2010. The Act avoided changes that would have caused a flurry of planning activity at year end. Still, this is the last chance for a last-minute consideration of any year-end tax planning considerations.
The subscription service mystockoptions.com recently came out with two helpful web articles:
“What impact does the new 2010 Tax Relief Act have on stock compensation and year-end financial planning?”
“Ten Ideas For Year-End Tax Planning With Stock Options And Company Stock”
I found these articles to be a useful and comprehensive checklist for stock plan professionals – good for issue-spotting, if nothing else (even though some of the links represent content that can’t be viewed without a subscription). The discussion of alternative minimum tax (AMT) rates is especially helpful.
By the way, the new tax law is only 30 pages long. After all the times I have linked to the 800 page-plus Dodd-Frank Act, a 30 page law is a pleasant surprise.
ISS Issues FAQs on Frequency Vote and Other Policies
Last week, the shareholder advisory service ISS issued Frequently Asked Questions on its 2011 compensation policies, including several questions on the frequency vote. As reported in this previous post, ISS is recommending that shareholders vote in favor of an annual Say-on-Pay vote. Mark Borges of Compensia, in his Proxy Disclosure Blog on compensationstandards.com (subscription site), offers some useful observations on the FAQs:
Question No. 2: Would a management recommendation of a two-year or three-year frequency trigger a negative recommendation from ISS on other proxy items? Answer: We have no policy concerning management's recommendation for the say on pay frequency. [Borges] Observations: In other words, during the 2011 proxy season (or, at least, the next four or five months) a recommendation of the board of directors for a biennial or triennial ‘Say on Pay’ vote will not have adverse collateral consequences on other compensation-related proposals (or the election of directors) that are slated for consideration at the annual meeting of shareholders. . ..
Question No. 4: In the event that a company's board decides not to adopt the say on pay vote frequency supported by a plurality of the votes cast, what are the implications in terms of ISS' voting recommendations at subsequent meetings? Answer: This policy has not been determined. The policy will be decided after review of the first year of voting results and after consultation with ISS's clients, and will be included in the policy updates for 2012. [Borges] Observations: . . . While ISS could go in many different directions, I expect that, where a board of directors selects a frequency for future "’Say on Pay’ votes that differs from the frequency supported by a plurality of the votes cast, it will consider that a basis for recommending a "withhold" or "against" vote for compensation committee members (and, potentially, all directors). Of course, the analysis of the board's decision may not always be that straightforward. . . . Ultimately, I suspect that whether ISS considers this important enough to warrant a formal policy will depend less on the vote results themselves, but on how companies respond to those results.