COBRA Coverage Assistance Extended

Monday, December 28th, 2009 | Executive Compensation, Executive Compensation Attorney, Federal Legislation | No Comments

On December 19, 2009, the American Recovery and Reinvestment Act of 2009’s (ARRA) COBRA health insurance subsidy was expanded.  Under ARRA, individuals involuntarily terminated from an employer covered under COBRA may be eligible to pay a reduced amount equal to 35% of their usual COBRA extended coverage premium.  The extension, included in the Department of Defense Appropriations Act, 2010, increases the time that individuals may take advantage of the subsidies from nine to 15 months and extends the deadline to enter the program from December 31, 2009 to February 29, 2010.  Additionally, the revision permits individuals to make retroactive premium payments to restore coverage and eligibility in the program. 

For information on The Employment Law Group® law firm’s Executive Compensation Practice, click here.

Amendments to Proposed Health Bill Lower Deductibility of Insurance Executive Pay

Tuesday, October 13th, 2009 | Executive Compensation, Federal Legislation | No Comments

On October 1, 2009, the Senate Finance Committee, by a vote of 14-8, approved an amendment proposed by Sen. Blanche Lincoln (D., Ark.) which would lower the current executive pay tax deduction from $1 million to $500,000.   The amendment was made to the proposed America’s Healthy Future Act of 2009 and includes deferred remuneration and previous existing contracts.

Sen. Lincoln reasons that the proposed legislation will serve as a windfall to the insurance industry and therefore the deduction for executive compensation should be reduced to ensure that revenue stays within the company to lower premiums.  For the reduction to apply to an insurer, the company must receive 25% of its gross premium income from plans that meet the minimum creditable coverage requirements in the proposed Act.

However, there is still ambiguity because the definition of minimum creditable coverage as defined by the Act does not apply to individual, small group and other group private health insurance.  That is left to each state’s insurance commission.

This amendment is consistent with last year’s amendments to IRC § 162(m)(5) which lowered the tax deduction of executives of companies receiving T.A.R.P. monies from $1 million to $500,000.  Perhaps we are seeing the start of a new trend.

For information on The Employment Law Group® law firm’s Executive Compensation practice, click here.

White House to Announce New Rules on Executive Pay

Wednesday, June 10th, 2009 | Executive Compensation, Federal Legislation | No Comments

Today, the Obama administration is scheduled to announce proposals that would give shareholders more input on executive compensation and ensure that corporate compensation committees have more independence when determining executive pay.  The first proposal, known as the “Say on Pay” proxy resolution would require all publicly traded companies to allow an annual, nonbinding vote for shareholders to decide on proposed executive compensation measures.  Additionally, the “Say on Pay” program provides that shareholders maintain the right to vote on the compensation for the top five company executives.  The second proposal which seeks legislation similar to the Sarbanes-Oxley Act, would give more authority and more exacting standards to corporate compensation committees, including the ability to hire independent compensation consultants and outside counsel. 

For more information on executive compensation, visit The Employment Law Group® law firm’s Executive Counsel Practice at http://www.employmentlawgroup.net/PracticeAreas/Executive-Compensation.asp.

Former Executive Wins $4.1 Billion in Employment Contract Dispute

Tuesday, June 9th, 2009 | Breach of Contract, Breach of the Implied Covenant of Good Faith, Executive Compensation | No Comments

A California Court has recently confirmed an arbitration award of $4.1 Billion for a former executive in a suit against his former employer, iFreedom Communications, Inc. (iFreedom).  The award, which is being touted as the largest damages award issued in an employment arbitration, stems from a dispute over a compensation agreement where iFreedom agreed to pay its former chief marketing officer a commission structure of five percent of gross sales, company stock, and other benefits in exchange for his experience in building marketing organizations.  According to the former executive, the company failed to pay him according to the compensation agreement and terminated him without cause when he confronted the company about the unpaid wages.  The arbitrator found in Chester’s favor, concluding that iFreedom and its founder were liable, among other things, for breach of contract, breach of the implied covenant of good faith and fair dealing, and failure to pay wages.  The arbitrator also determined that Chester demonstrated by clear and convincing evidence that the defendants engaged in “a pattern of despicable conduct,” and thus, an award of punitive damages was appropriate.

The massive award of $4.1 billion in this case is significant because it highlights the fact that employers can face severe penalties for failing to satisfy contractual obligations owed to employees.  The Employment Law Group® law firm has successfully represented and advised senior executives in employment-related contract disputes including breach of stock option agreements and compensation agreements.  For more information about the firm’s Executive Counsel Practice, click here.

House Passes New Bill with More Restrictions on Executive Pay

Wednesday, April 8th, 2009 | Executive Compensation, Federal Legislation | No Comments

The House has approved H.R. 1664, the Pay for Performance Act of 2009, to restrict executive compensation at companies that have received funds from the Troubled Assets Relief Program (TARP). The decision to impose additional limitations on executive payouts follows a massive public outcry about the $165 million that American International Group, a recipient of nearly $200 billion in bailout funds, has issued in payouts to its executives in the last month. The bill, which amends the executive compensation provisions of the Emergency Economic Stabilization Act of 2008, would bar recipients of TARP funds from paying any bonus that is “unreasonable or excessive” or that is not “directly based on performance-based measures.”  The bill also calls for financial institutions subject to the new compensation requirements to submit an annual report to the Treasury Secretary stating how many executives received or will receive total compensation above specified dollar amounts during the fiscal year. To learn more about The Employment Law Group® law firm’s Executive Counsel Practice, go to http://www.employmentlawgroup.net/PracticeAreas/Executive-Compensation.asp.

President Caps Executive Pay at $500K

Thursday, February 5th, 2009 | Executive Compensation, Severance Agreements | No Comments

Yesterday, President Obama announced that senior executives of companies receiving the most funds from the Troubled Assets Relief Program (TARP) will have their pay capped at $500,000.  The decision to limit executive compensation follows a report that financial institutions that received money from the economic bailout paid as much as $18 billion in bonuses in the last year despite the economic crisis.  In addition to limiting executive compensation, the plan to protect taxpayers’ interests also includes:

• Decreasing severance pay for top executives who leave TARP funded institutions;
• Increasing the number of senior executives subject to the golden parachute rule;
• Restricting the liquidation of stock incentives until government funds are repaid; and 
• Requiring corporate boards to modify their policies on executive perks.

To learn more about The Employment Law Group® law firm’s Executive Counsel Practice, go to http://www.employmentlawgroup.net/PracticeAreas/Executive-Compensation.asp.

CEO Compensation Trends in 2008

Wednesday, January 7th, 2009 | Executive Compensation | No Comments

In a report released on December 24, 2008, the Conference Board announced that CEO compensation is increasingly in the form of stock rather than cash and stock options.  However, two-thirds of industries studied saw an increase in median CEO cash compensation comprised of salary, bonus, and non-equity incentive compensation.  The greatest increase in median CEO cash compensation was in the insurance industry.  Food and tobacco industry executives enjoyed the largest increase in median total compensation comprised of cash compensation plus present value of options, value of stock awards, change in pension value and earnings on non-qualified deferred compensation, and all other compensation.  The effect on executive compensation of the current recession that started in December 2007 is not reflected in the report, since it is based on proxy filings covering fiscal year 2007.

For information on The Employment Law Group® law firm’s Executive Compensation practice, click here.  To view the Conference Board press release, click here.