Transitions in Employment

Archive for the ‘Internal Revenue Code’ Category

The compensation package of Eugene Isenberg, former CEO and now chairman of Nabors Industries, Ltd., including a proposed $100 million termination payment, illustrates the far extreme of executive compensation.  While institutional shareholders brought suit to challenge his compensation, wasn’t there due diligence before investments were made?

Read the rest of this entry »

Great title for the Wall Street Journal‘s article “Wall Street Pay Gets Even Trickier to Figure” — executives be wary as company consider modifying deferred comp arrangements. If not done properly, IRS Code 409A liability can be triggered with the executive bearing the unintended financial responsibility.

This post was co-authored by Charles A. Bruder, a Member of Norris McLaughlin & Marcus and Co-Chair of its Executive Compensation & Employee Benefits Group. Charles is experienced in all aspects of defined contribution and defined benefit plans, deferred compensation arrangements, stock option plans, employee stock ownership plans, and other incentive and equity-based compensation arrangements.

According to the Wall Street Journal, Morgan Stanley plans to significantly reduce bonuses and will defer cash payouts over $125,000 until the end of 2012, noting that “[s]ome top executives will receive nothing now, deferring their 2011 payouts until the end of this year.”  Deferred compensation is becoming more prevalent in similar situations where companies do not have adequate cash on hand.

This, in fact, is a change of the compensation structure, which raises Section 409A concerns.  Adequate consideration has to be given to the labyrinth of Section 409A of the Internal Revenue Code — it has to be carefully navigated.

Keep in mind that if a portion of your compensation consists of deferred compensation, your employer may have a limited ability to change your payment schedule without entering into new plans and agreements.  While this modification addresses 2012 compensation, there may also be staggered deferred arrangements that pay out in the current year.  Since the IRS imposes the 409A tax liability on the individual, plans and agreements should be carefully reviewed.

Bonuses Are Sinking at Morgan Stanley

This post was co-authored by Charles A. Bruder, a Member of Norris McLaughlin & Marcus and Co-Chair of its Executive Compensation & Employee Benefits Group. Charles is experienced in all aspects of defined contribution and defined benefit plans, deferred compensation arrangements, stock option plans, employee stock ownership plans, and other incentive and equity-based compensation arrangements.