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L-Blast | April 2012 | Proxy Advisory Firms’ Influence on Comp, Deductibility of Bonus Programs, JOBs Act, & 162(m) Compliance

This year’s proxy season is just about all wrapped up. We at NFPCCmp;A continue to talk with the SEC, RiskMetrics, and other shareholder groups and institutions on behalf of clients, and the results have been mixed but productive. We are continuing to monitor this for you, as well as some of the hyped-up scrutiny private companies and not-for-profits have come under from both the IRS and certain state attorney generals. One thing is certain — pay is never boring.

As such, this month’s L-Blast has four important articles on Proxy Advisory Firms’ (PAFs) influence on pay, a ruling on timing for deductibility of annual incentive plans, reduced compensation disclosure for IPO companies, and recent lawsuits around section 162(m) of the IRC. All four are very interesting reads for both public and private companies.

New Research Shows Significant Influence on Proxy Advisory Firms on CEO Compensation »

The Conference Board of PR Newswire
More than two-thirds of U.S. companies say that their executive compensation program is influenced by the policies and voting recommendations of proxy voting advisors like Institutional Shareholder Services (ISS) and Glass Lewis, according to new research from The Conference Board, The NASDAQ OMX Group, Inc., and Stanford University’s Rock Center for Corporate Governance. In particular, a majority of corporate boards are likely to change CEO compensation to gain a favorable “say-on-pay” recommendation from these firms.

IRS Issues Important Ruling on the Proper Timing of Employers’ Deduction of Annual Bonus Payments »

Michael Melbinger of Winston & Strawn LLP
Readers will know that I have blogged on the proper timing of employers’ deduction of annual bonus payments several times over the last eight years. Code Sec. 461 generally allows an employer to deduct in its Year 1 tax year bonuses that it pays to employees within the first 2 ½ months of Year 2 (for example, for a calendar-year employer, payment by March 15, 2012, for a deduction in 2011) and the employees are not taxed until Year 2. However, that grace period only applies if “all events” fixing the obligation have occurred by the end of Year 1. To the extent that an employee must remain employed until the actual payment date in Year 2, the all events test may not be satisfied and the deduction may not be available until the Year 2 tax year.

Jobs Act Becomes Law »

by Davis Polk & Wardwell LLP
On April 5, 2012, President Obama signed the Jumpstart Our Business Startups Act (the “JOBS Act”), which was passed by the House of Representatives on March 27, 2012, in the same form passed by the Senate on March 22, 2012. This memorandum focuses on those provisions of the JOBS Act that impact compensation, specifically: 1) reduced executive compensation disclosure obligations for “emerging growth companies” (“EGCs,” or companies with less than $1 billion in total annual gross revenues in the most recently completed fiscal year) that completed an IPO after December 8, 2011, or would like to IPO; and 2) increased flexibility for issuance of equity compensation by private companies, without triggering public company reporting requirements.

There’s a New Sheriff in Town: 162(m) Compliance »

Navigating the treacherous waters of regulatory reform and ensuring compliance with the countless rules and regulations imposed under the current anti-business administration places significant constraints on a company’s time and resources. Therefore, keeping up-to-date on current regulations becomes even more imperative. Staying knowledgeable and aware of the details of the regulations, as well as recent changes, is the only way to ensure your company will steer clear of the recent surge of lawsuits as well as meet 162(m) deductibility guidelines in 2012.

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