Equity Compensation Plans Should Be Amended to Include Mandatory Antidilution Adjustment Provisions

We recommend that clients review their equity compensation plans immediately to determine whether the plans’ antidilution adjustment provisions should be amended as a result of changes made by FAS 123(R).

Most equity compensation plans include a provision that permits the company’s board of directors to modify options and other equity grants in the event of an equity restructuring such as a stock dividend, stock split, spinoff or recapitalization. However, practice in this area is not uniform – some plans call for a mandatory adjustment in all cases, while other plans call for a mandatory adjustment in the case of relatively straightforward transactions (such as stock splits) but do not address more complex transactions (such as spinoffs).

For the full story, please view the PDF.