The compensation area has become an increasingly challenging for all companies, whether public or private, established or start-up, as new tax and securities laws and regulations and changes in the accounting rules have introduced a range of complexities in the face of widespread criticism of compensation practices. Our attorneys monitor all developments in the executive compensation area and are at the forefront in helping companies navigate through the new tax rules under Section 409A, the expanded executive compensation disclosures mandated by the SEC and the adaptation to the new financial accounting regime in effect for stock-based compensation. Because of their depth of experience, our attorneys offer practical solutions to complicated situations. We focus primarily on three major areas relating to executive compensation.
Executive Compensation Agreements
Employment agreements define the executive/employer relationship. They serve as powerful recruiting tools and retention devices, provide certainty in the expectations of the parties to the employment relationship, and protect the interests of both parties in the event the employment relationship terminates. Morgan Lewis has tremendous depth and breadth of experience in negotiating and drafting employment and related agreements, including severance, change of control, retention, consulting, noncompetition and confidentiality agreements, and employment offers. Using our extensive shared database of forms and model documents, our practitioners can quickly and efficiently provide appropriate documentation for the vast majority of situations, while bringing to bear their substantial technical knowledge and drafting expertise in dealing with unique problems and issues.
We advise companies and, increasingly, executives in the negotiation of employment agreements and in the enhancement of a company's current employment arrangement structure (both with respect to new executives and in the context of corporate transactions). Our Executive Compensation Practice embraces arrangements for every type of employer, from multinational public companies, to middle-market and emerging public and private companies (including start-up technology and life sciences companies), to tax-exempt entities. We work with companies and executives in implementing appropriate noncompetition, nonsolicitation and confidentiality provisions, and we assist them with resulting internal and external public/shareholder relations and SEC disclosures. We also assist in ensuring that any arrangements are optimized from a tax standpoint, which includes designing change of control arrangements that minimize or eliminate adverse "golden parachute" tax consequences.
Equity Compensation Plans
Equity compensation is an essential tool in today's economy for attracting and retaining top talent, providing appropriate performance incentives, and rewarding exceptional performance. We in design and implement 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 advise publicly held companies as well as private companies, particularly emerging information technology and life sciences companies, with respect to income and employment taxes, ERISA, corporate laws, and labor laws associated with various types of equity compensation plans. Our practitioners are also familiar with the special and critical accounting policies and issues associated with equity compensation plan design and operation (including issues raised by option modifications and repricings). We assist plan sponsors and company executives with securities law compliance, including proxy disclosure, registration requirements, and insider trading/short-swing profits restrictions. In addition, we advise and represent clients regarding ESOP transactions, including leveraged buyouts, refinancings, and terminations of leveraged ESOPs, as well as the fiduciary duties associated with such transactions.
Non-Qualified/Deferred Compensation Plans
Members of the Employee Benefits Practice are also adept at working in the area of non-qualified plans and deferred compensation plans, involving the complex interplay of tax provisions such as Section 409A, ERISA, SEC, financial accounting and other legal and practical considerations. We have worked extensively with companies and executives to structure and document non-qualified and deferred compensation plans to attain tax benefits while at the same time achieving business goals such as flexibility of distribution options, appropriate long-term retention incentives and benefit security as well as financial efficiency. We have a depth of experience with respect to deferred compensation plans, supplemental executive retirement plans (SERPs), "rabbi" and secular trusts, corporate owned/bank owned/trust owned life insurance (COLI/BOLI/TOLI) and a number of other funding and security devices. Practice members are also experienced in dealing with deferred compensation and other planning issues in the context of Sections 162(m) (the $1 million deduction limitation for public companies) and 280G (special tax rules applicable to "golden parachute" payments).