Most equity plans include a governing law provision that provides that the plan and the awards granted under the plan are governed by the law of the jurisdiction in which the issuer is incorporated. In addition, we typically recommend that companies include a venue provision in their award agreements providing that any dispute related to the plan or awards has to be litigated in a forum chosen by the issuer. For US-based issuers, this will usually be a federal or state court in the United States, where courts are more likely to enforce the provisions of the award agreements (which typically favor the issuer). The hope is that, by including such governing law and venue provisions, companies can defeat lawsuits brought by award recipients outside the United States on the basis that foreign courts (which are more likely to apply employee-friendly local employment laws) do not have jurisdiction. It is questionable if this argument always works (in fact, a UK court recently ruled that UK courts had jurisdiction despite a Massachusetts governing law and venue provision in the award agreement), but such venue provisions may at least have a deterrent effect in some cases.
If we are looking at significant trends in 2013 affecting equity compensation programs, then the rise of foreign asset and account reporting obligations will have to be one of them. And Switzerland is to blame for it, sort of. For many years, wealthy individuals all around the globe, including in the US, have deposited millions of dollars in Swiss bank accounts, where local bank secrecy laws were thought to keep them hidden from the tax…
In the past several months, I have seen two companies (both large Fortune 100 companies in different industries) evaluate the merits of a choice program and it looks like both of these companies will move forward with such a program. In both cases, the companies will let employee choose what type of awards they should be granted during the annual grant cycle, e.g., 100% RSUs or 100% options or 50% options/50% RSUs, and so forth.…
We are at a time of year when many companies are making their annual grants so let’s discuss some best practices and “do’s and don’ts” regarding the preparation for annual grants. I am approaching these issues mainly from a legal perspective, so my comments below omit crucial steps that should not be forgotten, such as working with your accountants to determine the expense for the grants, working with your outside plan administrator to ensure documents…