2018 Alerts

2018.12.30  Director Compensation Storm Ahead - Brace for Litigation.  It is always risky to be an outlier in executive compensation matters, but the risk is likely to become acute in 2019 for companies that fail to plan correctly in response to ... continued at  Director Compensation.

2018.12.17  No Enforcement of Non-compete; No damages for breach (CT law). It is generally smart for executives to narrow the scope of non-competes and non-solicits not only to the scope of their work but also to those with whom they have interacted. That tipped the scales away from a former employer in Henkel v. Bell (ED Mich), which sets forth some instructive non-compete language. For a copy of the decision, and further information, see Connecticut

2018.12.05  Asset Purchasers Beware - Constructive Notice of Union Pension Plan Liability.  A recent 9th Circuit decision called out a common misconception -- in the form of "incorrect legal advice" that the buyer received prior to closing -- that "[a]bsent an express assumption of liability, the Buyer does not assume the [withdrawal] liability."  The decision went on to hold a private equity fund liable for $480,000 of withdrawal liability, even though all parties conceded that the purchaser had no actual notice of the liability.  Unfortunately for the buyer . . . continued at 
Pension Liabilities.

2018.11.30  GM Layoffs and a Smart Two-step RIF Strategy.  It is never easy to downsize a workforce.  The best companies aim to combine a considerate exit for those who leave, with morale-building incentives for those who remain.  What better way to start than GM just announced . . . continued at 
Two-step RIFs.​

2018.11.17   Broad-based Equity Awards: Does Amazon Lead Again?  In the equity award world, there is a regular debate about whether employers should make equity awards below the key employee level. For rank-and-file employees, cash bonuses and other workplace benefits (such as flexible hours) motivate better than low-levels of equity awards. Amazon seems to have reached that conclusion based on recent reports that RSU awards would be eliminated for . . . continued at  Stock Award Practices.

2018.11.12  M&A-related Executive Compensation Issues.  For the ABA's joint committee on employee benefits (JCEB), my Nov. 9th presentation was titled "Hot M&A Topics in Executive Compensation:From Avoiding Disasters to Making Deals Work."  For a copy of the PowerPoint or for questions relating to the impact of a merger or sale, feel welcome to send me  
an email.   

2018.10.18  Eve of Vesting Termination - Equity Intervenes?  Following a stock purchase, an executive of the target company indicated his desire to leave when his employment agreement was scheduled to expire. The purchaser responded by terminating his employment one month beforehand, thereby preventing the executive from vesting in $425,000 of LTI benefits. The last paragraph of the 5th Circuit's decision seems to indicate . . . . continued with case link at  
Stock Award and LTI Litigation.

2018.10.16  Tax Exempt Organizations: Governance Rules and Practical Advice.  Feel welcome to listen to this Wagner Law Webinar focused on the governance, design, and tax considerations that are particular to tax exempt organizations with respect to their executive compensation determinations and structures.  Just email Mark for a copy of our PowerPoint.  For relevant rules, survey data, and helpful resources, see 
Executive Compensation - Tax Exempt Orgs.

2018.09.30  Earn-out + ESOP Fiduciary Duty= SROF.  In 
Austin v. Commissioner, the Tax Court rejected arguments that two 47.5% shareholders were not taxable on their restricted stock awards at the time of grant because, quoting from the decision . . . continued at Substantial Risk of Forfeiture (SROF).

2018.09.25  CalPERS, Executive Compensation . . . and Elizabeth Taylor!  These three may seem like strange bedfellows, but the nexus comes from this truism about executive compensation: shareholder outrage erupts in down markets, and evaporates during booms. Witness for example the efforts of CalPERS to awaken some pay-for-performance alignment. For the years 2011 through 2017, CalPERS voted "no" for say-on-pay about 16% of the time. In 2018, that "no" vote percentage leapt to . . . continued at  
Say on Pay.

2018.09.24  Beware "Entire Fairness": It Sets a High Bar for Decisions about Director and Officer Compensation.  In contrast to the fizzle that followed failed say on pay litigation, claims of excessive compensation not only have legs, but momentum.  Within past weeks, one pharma company settled such litigation, and another was sued based on allegations that tend to give rise to these cases, namely . . . continued at  
Director Compensation Litigation

2018.09.21  Executives Behaving Badly - Remedies under Virginia Law.  The fact pattern in a recent Virginia case was not atypical: a senior executive allegedly misled his employer into paying him excessive bonuses.  For a detailed discussion of the potential claims by which employers may seek recovery, see  
this link.​ 

2018.08.28  Defusing the Litigation Risks relating to Executive Compensation Plans and Awards.  Here is webinar focused on possible changes that employers could readily make to their stock plans and awards, and other benefit plans, in order to reduce their litigation risks as well as position to better enforce loyalty-related covenants such as non-competes, non-solicits, and trade secret protections. For a copy of the PowerPoint, just send Mark an email.  For further info, see Executive Compensation Litigation.

2018.08.23  Moving the Bonus Plan Goalposts - Be Smart or Be Sued.  Whenever a company announces performance goals that apply to cash bonus, equity award, or vesting conditions, there is some risk that affected employees will later question the end-of-period determinations.  One recent lawsuit second-guesses the employer's financial calculations (alleging manipulation), and another involves Panera Bread's back-end addition of a maximum limit.  Well-drafted plans and programs include significant employer protections. But some defects can haunt, as shown in the cases discussed under  Litigation - Bonuses

2018.08.21  IRS 162(m) Guidance Brings Little Relief - Headache re Negative Discretion. Today, the IRS released Notice 2018-68, which addresses questions raised by changes to Code Section 162(m) as part of the Tax Cuts and Jobs Act of 2017. For a link to the notice and further information, including its provisions relating to "negative discretion," follow this link.

2018.08.04  Deferred Compensation Data - and Its Implications.  Regarding how employers have responded to 2017's tax reform act, the Plan Sponsor Council of America has issued a press release that presents intriguing survey data.  Several are reproduced, with insights drawn from them, at  Deferred Compensation.

2018.09.04  Director Compensation: $300K Price-tag to Settle.  It cost OvaSciences more than $300,000 of attorneys' fees to settle shareholder derivative litigation alleging that its directors paid themselves excessive compensation. The company also had to agree . . .  continued at Director Compensation Litigation

2018.08.01  Investment Expert for Retirement Plans; Immigration Accolades.  In widely-reported coverage of litigation against NYU, the expert witness testimony by Wagner Law founder Marcia Wagner was found to be "consistent, reasonable, logical and ultimately, highly credible.” Law360 accordingly headlined its article as follows:  "NYU's Victory In ERISA Battle Hinged On Expert Witnesses." A day earlier, the Brazilian Times featured Melissa McNamee in its article titled  "Wagner Law Group is the solution when it comes to immigration." 

2018.07.12   Executive Misconduct - Clawback and Other Remedies.  Law360 just released  this article about an oil company that is pursuing just the kind of remedies that David Gabor and I discussed during our August 28th webinar that is referenced above. See generally, Checklist: Precautions against Benefit Plan Litigation.

2018.07.11   Diversification from Employer Stock: Not Always a Bad Practice.  It is generally considered a best practice to assure that executives hold significant equity stakes in employer stock, in order to align their personal financial interests with those of shareholders. Nevertheless, too much employer stock could backfire under certain situations that make employer-sponsored diversification programs sensible to consider . . . continued at  Diversification from Employer Stock (with links to recent articles on this topic).  

2018.06.18  Deal-Breaking M&A Issues from Benefit Plans and Executive Compensation.  Merger and acquisition transactions will seldom break-apart due to issues related to employee benefit plans and executive compensation.  But seriously disruptive issues may arise, and are most likely to explode, when overlooked until the last minute. For a list of material issues to consider, continue reading here. ​

2018.06.03  Targeted Stock Ownership Levels for CEOs. At first blush, six times salary seems like a lofty level that 75% of public companies have targeted for CEO ownership of company stock.  Interestingly, if you consider that base salary tends to comprise less than half the income of most CEOs, then today's 6x remains right in line with the long-term conventional wisdom that three times total compensation is a baseline for targeted stock ownership for executives.  Nevertheless, the better focus for compensation strategists would seem to be . . .  continued with links to 2018 survey data at  Stock Ownership Guidelines

2018.05.17  New or Amended Stock Plans - SEC Provides Disclosure Interps. For proxy statements that include proposals for new or amended stock award plans, the SEC has just issued guidance that answers common questions, such as . . .  continued at  shareholder approval.  

2018.05.14  ISS Problematic Pay Practices - Updated. On at least an annual basis, those who make executive compensation decisions for public companies should check their practices against the guidelines published by ISS and other proxy advisory firms.  See this table for a checklist that generally tracks, the U.S. Compensation Policy FAQs that ISS most recently updated on December 14, 2017. ​

2018.05.13  Medical Powers of Attorney and Estate Planning.  This Investors Business Daily article is worth reading for smart reasons to get out in front of estate planning - especially for signing a medical power of attorney. Maryland provides a straightforward form, and it is thought-provoking to consider the choices. Glad to share more info via email.

2018.05.08  Checklist for Improving Release Agreements.  There is nothing worse for an employer than paying money to settle claims, and then finding that its claims release is invalid - or is resulting in further litigation.  See this page for provisions by which employers may avoid having their claims releases backfire.​

2018.04.30  ERISA and Severance Plans: 3rd Circuit Decision Should Prompt Employers to be Proactive.  Pursuant to the Supreme Court's seminal Fort Halifax decision, an "ongoing administrative scheme" is needed in order for a severance plan to become subject to ERISA. Plan designs that build-in elements of discretion generally create a scheme, but the 3rd Circuit just cast some uncertainty to that strategy by holding that . . .  continued at  Severance Plan Litigation.

2018.04.19  Excessive Compensation Claims Proceed vs CBS Directors. A Delaware Chancery Court decision details "an extreme factual scenario" involving salary and bonus payments that CBS paid to Sumner Redstone during a time when it was well-publicized that his health was failing.  The lesson for corporate directors involves . . .  continued at  Excessive Compensation Claims.

2018.04.17  Going Forward after Code 162(m) Changes.  It is one thing to recognize what changed, and another to take smart action in response. ISS has given some indication of what it expects. For discussion of these points and some ideas drawn from a teleconference that I co-hosted today, go to  Code 162(m) Update

2018.04.07  Voluntary Severance Plan - Fidelity's Experience. What happens when 3,000 employees over age 55 receive a buy-out offer because they have more than 10 years of experience?  Fidelity made that offer, and its results do not surprise because . . .  continued at  Voluntary Severance Plans, with a discussion of how those buy-out plans can work - and backfire.​​

2018.04.05  Tax Exempt Orgs - Watch out for 990 Audit.  Does anyone at the IRS really read Form 990s, 990-EZs, and 990-PFs?  Interestingly, the first level reader is not a human but a . . . continued at  990s.

2018.03.12  Successor Liability under ERISA -- "Big Buyer" Defense Fails for Asset Purchaser (7th Circuit decision).  To be held liable for a seller's ERISA withdrawal liability relating to a multiemployer plan, an asset purchaser must (1) have notice of the obligation, and . . . continued at  Defined Benefit Liabilities.

2018.02.21 Director Compensation - Precautions for Boards to Consider. See Wagner Law Blog for  "Litigation Risks Escalate for Director Compensation: How to Avoid Becoming the Next Target". 

2018.02.22  New Year - New Stock Plan?  If your company is on the bubble - or even close to the bubble - about adopting a new or restated stock plan, see this Bloomberg article for reasons why it makes sense to move forward now for shareholder approval in 2018.  The reasons go far beyond seeking more shares for awards (although that is generally the driving reason).  The article highlights a wide range of plan improvements that fun the gamut from authorizing smarter and more customized awards to . . .  continued at Stock Plan Improvements. 

2018.02.07  "The Front Line in the War Against Sexual Harassment" explains why "For employers who agree that bad acts should have bad consequences, 2018 will be a good year in which to revisit what is placed at risk, and how that risk will materialize."  Further discussed at  Dismissals for Cause.​

2018.02.01  My Law Firm Change (Poerio).  It is an honor for me to have joined Wagner Law Group, a truly preeminent boutique firm that brings together top-flight ERISA, employee benefits, employment, and immigration attorneys.  The firm provides one-stop service, and has a lean structure that keeps hourly rates remarkably reasonable.  As a result, I am excited about the opportunity to couple growth of my national executive compensation practice with a local Maryland business focus (thanks in part to joining the Maryland Bar last year).  See this CNBC article about my move, and feel welcome to sign up for our  WLG Alerts.​