Non-cash or cash-deferred remuneration such as medical insurance, vacation or retirement plans.
An alternative way to value stock options which uses company experience in lieu of market averages.
A period of time, normally preceding release of company earnings or other significant data, and during which pension fund investments may not be altered, during which insiders may not buy or sell shares.
The effect whereby paying executives with additional stock (including stock options) increases the total stock outstanding for a company and thereby the percentage of the company held by another stockholder.
Alternate term for equity compensation valuation. Also see Black-Scholes or Binomial Lattice Model.
Under SEC rules, information that is “filed” is subject to more stringent liability standards with regard to federal securities laws than information that is “furnished.” For example, a “filed” document is subject to Section 906 of the Sarbanes-Oxley Act of 2002, which among other things requires the information to be certified by the CEO and CFO. “Filed” documents are also subject to other SEC enforcement provisions such as the liability provisions in Exchange Act Section 18 or Securities Act Section 11.
Exchange Act Section 18 creates an express private right of action for any person who buys or sells a security based on a false or misleading statement or omission made in certain documents, at a price affected by such statement.
Securities Act Section 11 makes those responsible for a false or misleading statement liable in damages (based on the decline in value of the shares) to any and all purchasers regardless of from whom they bought.
The date when an equity award, such as stock options, is made to an executive.
Pay for executives or other senior staff for achievement of specified company objections or for increase in shareholder value.
An individual who has access to information about a company which is not generally available to the public. Senior executives are always considered to be insiders.
Award of stock or stock options which are not included in an approved incentive compensation program or as part of an Employee Stock Option Plan. Result in different tax treatment for both the recipient and company.
A term used to define the expectation that executive pay in the form of annual bonus and long term incentives should correspond to company performance in the market place as measured by returns to shareholders relative to its peers.
Stock options which have a strike or exercise price above the market price on the date of the grant. Premium priced options are used to encourage superior performance by requiring greater stock price increases to make the option of value.
An SEC and stock exchange required discussion of issues to come before a shareholder meeting and providing the opportunity for shareholders to vote on these issues. Proxy statements are required to present an extensive discussion of executive compensation and provide a vote on equity pay plans or changes thereto, along with election of Directors, selection of Independent Auditors and issues proposed either by the company or shareholders.
Provisions that require executives to retain shares received through option or share grants for a period of time after options or equity awards are exercised before they can be sold.
The process whereby a Compensation Committee seeks to target the amount to be earned by an executive. A typical target would be for base salary to match a peer group, annual incentive target at 100% of base salary, and long term incentive value of 400% of base salary.