International Bar Association Annual Meeting

Report
UNDERSTANDING EMPLOYEE
COMPENSATION AND BENEFITS
Presented by the Employment and Industrial Relations
Law Committee and the Taxes Committee
JOINT SESSION EMPLOYMENT AND INDUSTRIAL RELATIONS AND TAX
COMMITTEES
“Understanding Employee Compensation and Benefits”
MODERATORS
Marianne Granhøj, Kroman Reumert,
Denmark
[email protected]
Juan Bonilla, Cuatrecasas Gonçalves Pereira,
Spain
[email protected]
SPEAKERS
Mercedes Balado Bevilaqua, MBB Abogados,
Argentina
[email protected]
Jack Bernstein, Aird & Berlis LLP,
Canada
[email protected]
Avik Biswas, RDA Legal,
India
[email protected]
Christopher Jordan, CMS,
Germany
[email protected]
Daniel Ornstein, Proskauer Rose LLP,
United Kingdom
[email protected]
Todd Solomon, McDermott Will and Emery,
USA
[email protected]
Elissa Romanin, Minter Ellison,
Australia
[email protected]
CASE STUDY
Microcredit
US
Mirocredit
Australia
Bonus
Mirocredit
Argentina
IPO?
Microcredit
Canada
Mirocredit
India
Bonus
Bonus
Bonus
Bonus
Microcredit
UK
Bonus
Microcredit
Germany
Bonus
Executive Equity Plan
All-Employee Equity Plan
CASE STUDY: BONUS PAYMENTS
Annual Bonus
• Based on cash mediated and profitability worldwide
• No limits or caps
• 3-4 times of base salary
Mobile Employees
• Obligation to defer 50%
• Payable in Restricted Shares: 3 year vesting
• Good leaver and bad leaver provisions
Retention Bonus
• ¼ paid 1 year after IPO
• ¾ 3 years after IPO
• Continuity of employment
RESTRICTIONS ON EXECUTIVE PAY: BONUS CAPS:
EU / AMERICAN / ASIA-PACIFIC APPROACH
• CRD IV Directive
• UK Challenge
• US Position
• Canada Perspective
• Australia Approach
• South America
• Asia / India
RESTRICTIONS ON EXECUTIVE PAY: BONUS CAPS
•
Deferrals: clawback and forfeiture provisions
•
Extraterritorial effect of bonus restrictions
•
Pensions as a way to by-pass bonus restrictions?
•
Exchange control issues
•
Potential inconsistencies with local contracts
BONUS FOR MOBILE EMPLOYEES
2014
Bonus
Period
2015-2018
Vesting Period
for Restricted
Shares
•50% Cash
•50% Restricted
Shares
•
•
•
•
2019
Full Ownership
Release of
Restricted
Shares
When is it a taxable event?
Is it possible to defer taxation?
How complex can be the “mobile” element?
What if the Mobile employee is terminated before the release date?
RETENTION BONUS FOR CERTAIN EXECUTIVES
2014
Award of
Retention
Bonus
2015
2016-2020
IPO
¼ Bonus
¼ Bonus
¼ Bonus
•
Is it compliant with bonus cap rules?
¼ Bonus
CASE STUDY
Microcredit
US
Mirocredit
Australia
Bonus
Mirocredit
Argentina
IPO?
Microcredit
Canada
Mirocredit
India
Bonus
Bonus
Bonus
Bonus
Microcredit
UK
Bonus
Microcredit
Germany
Bonus
Executive Equity Plan
All-Employee Equity Plan
CASE STUDY: EXECUTIVE EQUITY PLAN
• 4 year vesting
• Performance
metrics
• IPO: Accelerated
Vesting
Restricted
Awards
Stock
Options
• 7 year exercise
• Exercise Price:
nominal value
• IPO: Automatic
exercise
• IPO: 1 year
requirement to
hold shares
Shares
EMPLOYEE EQUITY
TAX
• Taxation events:
−Grant
−Vesting
−Release / Exercise
−Sale
 Potential deferral of taxation
• Mobile employees
EXECUTIVE EQUITY PLAN (1)
2014
Grant of
Restricted
Awards
2014-2018
2018-2025
Vesting Period
of the Restricted
Awards
Exercise
Period
Conversion of
Restricted Awards
into Stock Options
•
•
Taxation events
Employment implications
EMPLOYEE EQUITY
EMPLOYMENT IMPLICATIONS
•
Grant of Holding Co vs. Grant of local subsidiary
•
Income tax withholding implications
•
Choice of law and enforceability: US law and arbitration
•
Termination payments
•
Continuation of awards upon termination
EXECUTIVE EQUITY PLAN (2)
2014
2015
2016
Full Ownership
Restricted
Awards
IPO
Conversion
of Restricted
Awards into
Stock Options
•
•
Taxation events
Employment implications
Opening of
Sale Period
EMPLOYEE EQUITY
EMPLOYMENT IMPLICATIONS
•
Impact and enforcement of non-competes on equity compensation
•
Works Council communications
•
Leave of absence provisions
CASE STUDY: ALL-EMPLOYEE PLAN
ESPP
Restricted Shares
• 4 year vesting
• 10% withholding
• Automatic release upon
• 15% discount
vesting
• 3 month life cycle
Eligibility: 1 year of service
Retirement Provision: “Rule of 55”
FUTURE THOUGHTS ON COMP&BEN
•
Public supervision vs. individual approach?
•
Increased regulation: moving out from employee equity plans?
•
Fast changing compensation structures: how to make them
effective?
•
20% cap on bonuses: is it really effective for the country?
Any questions?
Many thanks!
JOINT SESSION EMPLOYMENT AND INDUSTRIAL RELATIONS AND TAX
COMMITTEES
“Understanding Employee Compensation and Benefits”
MODERATORS
Marianne Granhøj, Kroman Reumert,
Denmark
[email protected]
Juan Bonilla, Cuatrecasas Gonçalves Pereira,
Spain
[email protected]
SPEAKERS
Mercedes Balado Bevilaqua, MBB Abogados,
Argentina
[email protected]
Jack Bernstein, Aird & Berlis LLP,
Canada
[email protected]
Avik Biswas, RDA Legal,
India
[email protected]
Christopher Jordan, CMS,
Germany
[email protected]
Daniel Ornstein, Proskauer Rose LLP,
United Kingdom
[email protected]
Todd Solomon, McDermott Will and Emery,
USA
[email protected]
Elissa Romanin, Minter Ellison,
Australia
[email protected]

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