Jostock & Jostock, P.C. offers a comprehensive approach to equity and employee compensation arrangements. Some of the areas in which we work with clients to meet their equity, employee and executive compensation goals include:
Employment and Termination Agreements: In recent years, boards have engaged independent compensation consultants to assist with the development of their executive compensation programs. Given the potential conflict of interest for existing outside corporate counsel or in-house lawyers to negotiate legal matters with future or current senior management, boards are increasingly finding it appropriate to hire independent outside legal counsel for executive and equity compensation matters, particularly for employment and separation agreements.
Our team works closely with boards and their non-legal advisors to craft appropriate employment and separation agreements for each client’s particular situation. We give due consideration to the competing needs of protecting the company against overcompensating non-productive or culturally mismatched executives. Drawing upon our firm’s strengths in employment law, we draft concise documents that clearly reflect the economic agreement of the parties and deal with the legal “niceties” such as restrictive covenants and protection for misconduct.
Equity Compensation: Equity compensation is an important component of providing performance incentives to attract and maintain key employees. Our firm designs and implements broad-based and executive-level equity compensation plans including incentive stock option and nonqualified stock option plans, restricted stock and restricted stock unit awards, performance shares, and stock appreciation rights plans as well as employee stock ownership plans (ESOPs). We are familiar with the accounting policies associated with equity compensation, plan design and operation. We assist plan sponsors with the related compliance, disclosure and registration requirements.
Nonqualified Deferred Compensation: The biggest advantage of nonqualified deferred compensation plans is the ability for executives to accumulate meaningful retirement benefits in light of restrictive limits under traditional tax-qualified profit-sharing and pension plans. These plans often raise important questions about the continued viability of the employer to pay plan benefits and the risk that payments might not be made upon a change in control. Plan sponsors must also be mindful of ERISA rules, which restrict who may be covered under a nonqualified deferred compensation plan.
We regularly represent clients in designing nonqualified deferred compensation programs including make-whole plans that replace benefits not received due to tax-qualified plan limits, elective plans, supplemental executive retirement plans and rabbi trusts. We focus on practical and legal ways to provide flexible access to nonqualified deferred compensation prior to retirement without running afoul of constructive receipt rules and expanded coverage for employees.
Code Sections 409A and 162(m) Compliance: The enactment of IRC Code Section 409A has had a profound impact on executive compensation practices, not only for traditional nonqualified pension and deferred compensation plans, but also for individual employment agreements, severance agreements, equity compensation programs and long-term incentive arrangements.
In several cases, we redesigned the payment structure to take advantage of the “stacking” of certain exceptions to IRC 409A to avoid the “six-month delay” rule for payment of compensation to key employees of public companies upon separation from service. We also revised the definition of termination for “good reason” to fit within the involuntary separation rules under IRC 409A.
Change-In-Control Issues: Change-in-control transactions are full of pitfalls associated with tax, corporate governance, disclosure and reporting requirements. Mindful of their vulnerability to scrutiny by shareholder groups, we work with clients on relevant change-in-control agreements that can be successfully managed with the goal of establishing protections for executives and maintaining compliance with golden parachute rules—without compromising other competing interests.
As younger generations place more emphasis on private savings over government programs, retirement plans have become an increasingly important part of the employer’s total benefit and compensation package. Our firm handles the legal and operational issues related to qualified and nonqualified retirement plans, including defined benefit and cash balance pension plans, 401(k) plans and profit sharing plans.