Deloitte’s take on equity has been added to Bookmarks.
Deloitte’s take on equity
Re-aligning incentive compensation strategy in a downturn
We have presented five equity compensation strategies which could provide companies the flexibility to pull some immediately available levers to re-align their global incentive compensation strategy with critical organization-wide priorities during a depressed, volatile market.
- Aligning short term needs with long-term goals
- Five equity compensation strategies for consideration
- Ready to revisit your equity compensation strategy
- Get in touch
Aligning short-term needs with long-term goals
If “necessity is the mother of invention”, then the current business environment is the time to rethink routine business operations, including long-term incentive compensation strategy. Many organizations are thinking differently as they look to balance the need to conserve or generate cash and manage share usage and dilution levels while at the same time continuing to incentivize and retain key talent.
We have presented below five equity compensation strategies which could provide companies the flexibility to pull some immediately available levers to re-align their global incentive compensation strategy with current critical organization-wide priorities during a depressed, volatile market.
These planning opportunities are principally focused on a broad-based employee population and special consideration should be given to executive compensation particularly as each of these planning opportunities has many elements which must be considered. The elements to be thought through range from corporate governance, HR strategy and compensation philosophy and talent objectives to legal and regulatory impact. Further, careful review will need to be given to individual tax and payroll implications, finance, and accounting consequences as well as the optics of making changes to the global incentive compensation strategy in the current market. As such, these equity compensation strategies should be reviewed holistically with professional advisors and relevant stakeholders to determine their tax, legal, and accounting viability for your company before taking action.
In addition, the impact for plan participants will need to be carefully weighed, and the communications aspects should be thoughtfully managed in these times where many internal employee communications have ramped up significantly.
Five equity compensation strategies for consideration
Ready to revisit equity compensation strategies?
There is no one-size-fits-all solution to the challenges presented by a depressed market. However, as we have suggested above, there are numerous ways to plan for short-term needs without losing sight of long-term goals. Now is the time to revisit your long-term equity compensation strategy.
1 Section 409A of the Internal Revenue Code provides that non-qualified deferred compensation must comply with restrictions on the timing of elections and distributions or fit under an exception. Failure to comply with section 409A requirements can result in significant federal income tax consequences, including additional Federal income tax imposed on an individual and the assessment of interest and penalties for both an employee and employer.
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