Recent Wall Street reforms, heightened scrutiny by institutional investors and guidance issued by the Internal Revenue Service have put a spotlight on and exacted changes in the compensation arrangements employers provide for their executives. Littler understands how these complex and regulated arrangements for individuals or small groups can affect the finances and operations of an employer – as well as its public image.
Our lawyers have many years of experience developing and reviewing executive compensation plan arrangements and programs. The key to a successful arrangement is that it comply with applicable regulations while meeting a company’s business goals (including the maintenance of a good public image for the employer). Executive compensation is a business decision, not just a salary issue.
Executive compensation is a complex area of law because it encompasses a broad range of tax issues that impact non-qualified deferred compensation, stock options, restricted stock, phantom stock and other equity or synthetic equity as well as shareholder and corporate governance issues. Littler’s focus on labor and employment matters gives clients added perspective because executive compensation includes much more than salary and benefits. These arrangements are structured to meet the objectives of an employer with respect to its executives and often contain retirement, golden handcuff and golden parachute provisions that can impact an organization’s bottom line. With our experience and extensive resources, we provide employers with comprehensive, sophisticated and efficient services, minimizing time and costs while enhancing the relationship between executive and corporate performance.
As more executive compensation plans are designed to include pay for performance, our lawyers work closely with employers to help ensure that performance goals are well-defined and attainable, meeting the objectives of both the executives and the organization.
The value of these compensation plan arrangements and the benefits to be gained from such arrangements may not yet be fully appreciated or realized by corporations and tax-exempt organizations. These arrangements often play a key role in decisions regarding the compensation to be paid to attract, retain and motivate a key employee or employees, provide additional retirement benefits for key employees, and may be instrumental in achieving business objectives. A well designed executive compensation program can align the interests of the executives with the interests of the employer and its shareholders/stakeholders. Littler attorneys are well schooled in designing and drafting such arrangements, working with the employers that sponsor them, understanding the objectives regarding the employees that participate in them, and understanding the rules under ERISA and the Internal Revenue Code (particularly section 409A) that apply to them.
Our experience in executive compensation has allowed us to develop best practices and a database of requisite forms and model plans.
The Necessary Skills
Our lawyers have the combination of talents necessary in this dynamic area. We know how to deal with the many complex tax issues that are often critical in executive compensation matters, whether for public, private, non-profit or government entities. We have the business savvy to review with corporate lawyers how executive compensation may directly affect the company overall. We understand the economics of a contract so that we can help employers avoid unexpected costs or business risks. Our practice is supported by veteran litigators in areas that affect executive compensation plans, reflecting Littler’s integrated form of practice. With our nationwide geographic coverage, we can assist employers with executive compensation issues quickly, effectively, and efficiently, regardless of where they arise.
Other services we provide include the following:
- Preparing, reviewing and counseling on non-qualified deferred compensation arrangements, including advising on section 409A
- Auditing executive plans, including non-qualified deferred compensation, change in control, incentive bonus and supplemental retirement plans
- Counseling on alternatives for dealing with change of control issues and “golden parachutes”
- Advising on public company compensation deduction limits and performance-based compensation
- Establishing ways to attract and retain key management
- Advising on equity and synthetic equity based compensation
- Working with government and other tax-exempt employers in dealing with the particular statutory and regulatory provisions and tax rules that apply
- Assisting employers with sensitive considerations surrounding departure of executives, including critical issues of separation, severance and restrictive covenants
To complement our executive compensation lawyers, Littler has a robust employee benefits practice group as well as a team of benefits litigators, who represent employers in defending claims over benefits, benefit amounts, administrative matters, fiduciary duty violations and other benefit plan issues.