Page 502 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

488 The Complete Guide to Executive Compensation

Executive
Number of Shares Date Received
Advantages Fixed Variable Fixed Variable
Easily understood True False True False
No performance requirements True False True False
No cash needed to acquire stock True True True True
Long-term capital gains if holding
requirements met True True True True

Disadvantages
No stock unless vesting requirements
are met True True True True
Must stay with company True True True True
Demotivating if no shares received True True True True
Taxed at time vested True True True True
No cash to pay tax True True True True
May be subject to Section 409A True True True True
Table 8-71. Stock award advantages and disadvantages to the executive

Company
Advantages Number of Shares Date Received
Fixed Variable Fixed Variable

No cash outlay True True True True
Probable retention of executive
increased True True True True
Tax deductions when restrictions end True True True True
Positive cash flow from tax deduction True True True True
Reversal of expense if vesting
requirement not met True True True True*
May motivate performance to meet
objectives False True False True
Disadvantages
Increased dilution with stock awarded True True True True
Fair-value expense over vesting period
reduces profits True True True True
Executive likely to leave because of
vesting requirements False True False True
Reversal of unvested awards not
permitted if related to stock price True True True True
Requires setting performance objectives False True False True
May be subject to Section 409A True True True True
Table 8-72. Stock award advantages and disadvantages to the company