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How are
compensation records for each
executive maintained? For
example, is there a centralized file
for each executive, and does that
centralized file reflect all forms
of remuneration to the executive per
year?
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If centralized
files per executive are maintained,
what records should be
contained within the file? For
example, if an executive
participates in four
different compensation plans or
programs, will the centralized file
contain
the written agreement and election
forms with regard to the executive’s
participation in each of the plans
or programs?
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What records are
available to reflect stock-based
remuneration and how
are they maintained? For example, if
someone is granted stock options or
restricted stock, are the grants
evidenced by an Award Agreement or
Grant Agreement? How does the
corporation track exercises of stock
options or the vesting of restricted
stock grants? Is a centralized
computerized data base used or does
the corporation rely on paper
documents?
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At what level are
grants of stock options and
restricted stock made? For
example, if an executive of a
subsidiary is granted stock options,
is the
grant made at the subsidiary level,
or at the parent level?
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How is remuneration
granted or awarded to an executive?
For example,
who or what determines the
remuneration to be awarded an
executive: the
compensation committee, the Board of
Directors, an executive contract?
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Will all forms of
remuneration be reflected in an
executive’s employment
contract, or are there other methods
by which remuneration can be
awarded, such as an annual incentive
plan, yearly bonus pool, long-term
incentive plan, stock option plan,
restricted stock plan, phantom or
restricted stock unit plan, etc.?
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How are the
compensation committee minutes
maintained; do they
include proposals, exhibits,
attachments, resolutions, etc.?
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Does the
corporation provide phantom grants
or awards, such as phantom
stock or phantom equity?
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If the corporation
provides phantom grants or awards,
how are phantom
awards documented and tracked?
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Does the
corporation provide deferred
compensation arrangements?
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How are deferred
compensation arrangements documented
(i.e., via
written agreements or election
forms) and how are deferred amounts
tracked by the corporation and/or
executive (i.e., rabbi trusts,
separate
accounts, monthly statements)?
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Does the
corporation utilize the services of
outside administrators,
brokers, or consulting companies in
the formation, administration and
management of its various executive
compensation plans or programs? If
so, you will want to know who and
what plans or programs they are
connected with.
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How are stock
options and restricted stock grants
exercised? For
example, are they exercised directly
with the corporation or through a
broker or other third-party?
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How are stock
option exercises effected? For
example, when an
executive exercises stock options,
does the executive receive the
certificates evidencing the shares
of stock upon exercise; does the
executive have to pay the exercise
price for the options exercised or
does
the executive have the option of a
cashless exercise; does the
executive
have the option of receiving the
difference between the exercise
price and
the fair market value of the stock
in cash or other property?
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Does the
corporation have grant detail
reports reflecting options granted,
the grant number of the option, the
dates of exercise of the options,
and
the fair market value of the stock
as of the date of exercise? If so,
how
are these records maintained and are
they available for individual
executives?
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Does the
corporation provide split-dollar
life insurance policies to any of
its
executives?
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Does the
corporation use acronyms, codes or
other symbols to identify
transactions, such as stock options
that were granted as the result of a
bonus plan? If so, you will want a
copy of the list of acronyms and
what
they mean.
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Does the
corporation have a practice of
deferring compensation that
would otherwise exceed the $1
million limit from years in which
the
recipient is a covered employee for
purposes of § 162(m) to years during
which the recipient is not a covered
employee? If so, you will want to
determine whether the deferred
amounts were actually or
constructively
received by the recipient during an
earlier year (when the recipient was
a
covered employee), resulting in a
disallowance of the deduction (both
for
the year of payment and the year in
which the amounts were
constructively received). Also, if
amounts are paid within 2 and ½
months
after the end of a year in which the
recipient was a covered employee and
such amounts accrued during that
year, the deduction should be
claimed
for the year of accrual (and
therefore should be subject to the §
162(m)
limitation), not the year of payment
(when the limitation would not
apply).
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Does the
corporation have one or more
qualified performance-based
compensation plans that have been
approved by its stockholders? If so,
you will want to determine whether
those plans are in compliance with
§ 162(m), both in form and
operation.
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Has the corporation
made modifications to performance
goals or targets
after the beginning of the
performance period to which such
goals or
targets relate? Are amounts being
paid to covered employees whether or
not the relevant goals and targets
have been attained?
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Which executives
were listed on the corporation’s
summary compensation
table in the corporation’s annual
proxy statement for the years at
issue?
