Robert Adelson, Esq.
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Stock Rights That Protect the Value of Your Executive Equity Compensation

9/14/2022

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On Thursday September 1, 2022, 2022, CEOWorld magazine published an article I wrote on “Stock Rights That Protect the Value of Your Executive Equity Compensation.”

This new article is designed for CEOs, C-level and senior executives, who have recently received a job offer or expect to receive a job offer and will be negotiating terms of executive compensation which will include executive equity. 

In those negotiations, executive equity is often a very significant and often a major part of the executive compensation and a often a driver to accept a job offer.  This is so because executive equity offers the prospect of greater financial upside value than from your fairly fixed and limited cash compensation.  This special upside potential for executive equity arises from three different factors: (a)  Appreciation – with your service the stock price or value might rise significantly, (b) Liquidity Event – a potential acquisition or an IPO  might also significantly increase value, (c) Favorable Taxation – with appropriate structuring, appreciated equity on cash out may be taxed at a much lower rate than cash compensation for much greater take home pay. 

Thus, given the high importance of equity in the CEO’s or C-level executive’s compensation package the focus of my article then moves to discuss these five (5) critical areas of stock rights and terms you want to be sure to give proper attention in your negotiations to give you the best chance to achieve the potential value from the equity you are granted: 
  • Meaningful Level of Equity – to be sure that sufficient equity is granted so that if success is achieved, it will be impactful for you,
  • Tax Favorable Structure – negotiation over the form of your equity at the outset is quite important because in tax law – “form is substance” – different forms produce very different tax results and you want tax-favored equity if possible,
  • Severance Protection – if midway through the buildup you are forced out, you want your severance buy-out to embrace your equity as well as less important cash components of your comp package,
  • True Up Adjustment – especially if you are brought in to secure a financing raise, you don’t want to be a victim of your own success and seeking a level anti-dilution protection is a fair ask,
  • Cash-out protections – if after a number of years, no liquidity event is on the horizon, it is helpful to have a put option with the company to assure at some point you can tap into the value you achieved.

To see my full CEOWORLD magazine. article, go to LINK: https://ceoworld.biz/2022/09/01/stock-rights-that-protect-the-value-of-your-executive-equity-compensation/

Or on my website at https://www.executiveemploymentattorney.com/stock-rights-that-protect-the-value-of-your-executive-equity-compensation/

This was my 38th article published in CEOWORLD since 2016.  Previously, the editor advised that I can use “Featured in the CEOWORLD magazine” and the CEOWORLD “Logo” on my website and add CEOWORLD magazine in my LinkedIn profile’s “Experience Section” as an “Opinion Columnist.” and authority in the field.  

On its own initiative, CEOWORLD magazine created on their website a library of Robert Adelson published articles.   You can peruse this library and/or read as many of my 38 published articles as you wish.  See https://ceoworld.biz/author/robert-adelson/
​
With more than 12.4+ million-page views, CEOWORLD magazine is the world’s leading business magazine written strictly for CEOs, CFOs, CIOs, senior management executives, business leaders, and high net worth individuals worldwide. https://www.linkedin.com/company/ceomagazine/
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Gaming CEOs traded salary for stocks. Their ‘gamble’ is set to pay off

1/3/2021

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Two weeks ago, on December 18, 2020, I was quoted on the utility of corporate CEOs taking restricted stock units (RSUs) in lieu of cash bonuses, in an article, with the title above, published in the  Las Vegas Review-Journal.​

The newspaper that published this article, Las Vegas Review-Journal is the largest circulating daily newspaper in Nevada and ranked as one of the top 25 newspapers in the United States by circulation. https://en.wikipedia.org/wiki/Las_Vegas_Review-Journal
Should you have RSUs in your CEO compensation package?
The article was about casino company CEO compensation, and how a number of Las Vegas-based CEOs had reduced their salaries in exchange for RSUs amid the pandemic, with the reporter  wondering what their compensation might look like down the road.
​
In the course of our interview, I suggested a number of benefits from this exchange executive compensation strategy of a cash bonus exchanged for RSUs – both to benefit the executive personally but to benefit the company and company stakeholders, including the following:
  • Deferral of taxation that would come from immediate payment of the bonus, and deferral of taxation on the unvested portion until vesting has later occurred.
  • Leverage of the amount of bonus magnified by the growth potential of the RSU, still further enhanced by the current low value due to the pandemic
  • Assurance of a future payout to the CEO by use of RSUs rather than options because RSUs after vesting always retain some value.  RSUs effectively have a floor on value. They can never go underwater and become worthless as often happens with stock options.
  • Use of the extra RSUs / redemption strategy to minimize effective taxation as RSUs vest, where in this way the company would typically pay for or assist in payment of the taxation, and the executive is more willing to pay a portion of the taxes since vesting has occurred.
  • The benefit to company morale from the “vote of confidence in the company’s future” by the CEO choosing company stock over cash.
  • The potential cascading benefit to the company with current employees and future hires who are heartened by the example of the man or woman at the top choosing company equity over an immediate cash payout.
  • Benefit to investors, alliance partners and other stakeholders by enhanced “alignment” of the CEO’s financial prospects tied to company growth.
To see this full article on CEO use of RSUs in the Las Vegas Review-Journal , go to LINK:

Gaming CEOs traded salary for stocks. Their ‘gamble’ is set to pay off.
 
Or https://www.executiveemploymentattorney.com/wp-content/uploads/2021/01/Attorney-Rob-Adelson-in-Casino-CEOs-trade-bonuses-for-stock-Las-Vegas-Review-Journal.pdf

The business reporter who authored this article, Bailey Schultz, said she had found me and reached out to me after reading an earlier article I wrote on RSUs that was published in CEO World.  That article, published February 28, 2017, was entitled “The Advantage of RSUs in Your CEO Compensation Package.” 

My 2017 RSUs article, targeted toward CEOs, C-Suite executives and other senior level executives, discussing the benefits of RSUs as a key part and often the most important part of their compensation package.  The article discussed how RSUs are most useful in mature companies where the CEO or C-suite executive takes a position where stock has considerable value, but growth is still expected in the public company or perhaps an IPO or liquidity event is not far off or in a turnaround situation in a mature company where there is no assurance of appreciation and the CEO needs assurance of a floor in his or her equity value.   
​
As part of my overall discussion of RSUs, my 2017 article covered these topics –
  • What are RSUs?  When are RSUs paid out? 
  • How are RSUs taxed?   How do you pay the taxes that come due on RSUs?
  • When are RSUs most useful?  When are RSUs least useful? 
  • What sort of RSU package should a CEO or C-suite executive look for? 
  • Key Terms to negotiate in RSU grants

​To see my full article, go to LINK:   http://ceoworld.biz/2017/02/28/advantage-rsus-ceo-compensation-package/   
or http://www.executiveemploymentattorney.com/articles-section/the-advantage-of-rsus-in-your-ceo-compensation-package/

​It is my hope that this article will be of benefit to CEOs, C-level and senior executives who might benefit or whose companies might benefit from the use of RSUs as part of the executive compensation package. If you or any colleague of yours has a need in this area, please do reach out to me at rob@attorneyadelson.com.
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Negotiating a Custom CEO or C-level Executive Compensation Package

11/12/2020

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On November 5, 2020, CEOWorld magazine published an article I wrote on “Negotiating a Custom CEO or C-level Executive Compensation Package” . ​

This new article is designed for  CEOs, C-level and senior executives, who are negotiating new job offers where the metrics of a routine Gartner or Mercer compensation survey are just not appropriate for that particular CEO or C-level executive compensation package, and the executive employment advisor is called upon to suggest, design and then lead the negotiations for a custom executive compensation package.​
woman executive

​My article first suggests three situations well suited to justify development and deployment of a custom executive compensation package:
  • Start-up and early stage company CEOs,
  • Turnaround CEO situation, and
  • Special needs executive recruitment – where a CEO or C-level executive has special attributes that fill a critical need for the company. 

My article then moves on to discuss that the custom package must not only make up for your loss of pay and benefits to leave your current employer, but even more so, to make up for three further critical intangibles as well, and hence – what should be included on your custom executive compensation package? And how much equity compensation should you ask for? 

The article then concludes with my suggestions for how the executive can achieve company “Buy-in” – how do you sell the custom CEO or C-level executive compensation package to an often skeptical employer?  This last part shares three of my best “sales” techniques:
  • You (employer) want and need an “A” team player, this custom package will not only secure the services of a true A player but his or her successful recruitment  will help you to attract still more A team players to the company.
  • You want alignment and this custom package greatly magnifies the alignment of this key executive hire with the growth goals of the company, and
  • Success for my executive, even with this full custom package, means vastly greater success to the company’s stockholders, often 10x, 15x and even 20x pay back return for the company’s stockholders, if the CEO or C-level executive succeeds in his or her mission, and costs little or nothing if he or she does not succeed.

To see my full CEOWorld magazine. article, go to LINK:
https://ceoworld.biz/2020/11/05/negotiating-a-custom-ceo-or-c-level-executive-compensation-package/
Or on my website at https://www.executiveemploymentattorney.com/negotiating-a-custom-ceo-or-c-level-executive-compensation-package/

This was my 31st article published in CEOWORLD over the last five years.  Previously, the editor advised that I can use “Featured in the CEOWOLRD magazine” and the CEOWORLD “Logo” on my website and add CEOWORLD magazine in my LinkedIn profile’s “Experience Section” as an “Opinion Columnist.” and authority in the field.  See https://ceoworld.biz/author/robert-adelson/

Picture
With more than 12.4+ million-page views, CEOWORLD magazine is the world’s leading business magazine written strictly for CEOs, CFOs, CIOs, senior management executives, business leaders, and high net worth individuals worldwide.
​

It is my hope that this article will be of benefit to CEOs, C-level and senior executives who are considering job offers in situations where a custom executive compensation package is appropriate.  Feel free to tweet or share this article. If you or any colleague of yours has a need in this area, please do reach out to me at rob@attorneyadelson.com.
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Achieving Zero Taxation on Sale of Your Startup Equity

9/7/2020

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Last Thursday, on September 3, 2020, CEOWorld magazine published an article I wrote on “Achieving Zero Taxation on Sale of Your Startup Equity”.
​

This new article is designed for CEOs, C-level and senior executives, who are considering taking a position in a startup or early stage company in life sciences, tech, e-commerce or another high growth area of the economy, where executive equity may comprise a major part of your compensation package.
CEOWorld Magazine logo
My article discusses how taking equity in qualified small business stock may enable you to have zero Federal taxation on all or most of your appreciation on a sale of shares after 5 years. That exclusion from tax applies to not only the Federal capital gains tax but also the net investment income tax and the alternative minimum tax (AMT), on appreciation up to $10 million or 10x your adjusted tax basis in the stock, whichever is greater.
​
The article also includes a number of important tips to qualify your shares for this tax exclusion on sale, including the following:
  • Obtain stock not options — only actual stock issued will qualify as QSBS and start your holding period to qualify for tax free treatment;
  • Making a Section 83(b) tax election for QSBS to eliminate ordinary income as well as capital gains tax,
  • Assuring the business is qualified, including that the business is still under $50 million in gross assets when QSBS are issued to you, and
  • Planning your roll-over if needed to meet the 5-year holding period even if you sell your shares within that period.
To see my full CEOWorld magazine. article, go to LINK:
https://ceoworld.biz/2020/09/03/achieving-zero-taxation-on-sale-of-your-startup-equity/
Or https://www.executiveemploymentattorney.com/achieving-zero-taxation-on-sale-of-your-startup-equity/
​

This was my 29th article published in CEOWORLD. Previously, the editor advised that I can use “Featured in the CEOWORLD magazine” and the CEOWORLD “Logo” on my website and add CEOWORLD magazine in my LinkedIn profile’s “Experience Section” as an “Opinion Columnist.” and authority in the field. For a library of my past article published by CEOWORLD, see https://ceoworld.biz/author/robert-adelson/

With more than 12.4+ million-page views, CEOWORLD magazine is the world’s leading business magazine written strictly for CEOs,CTOs, COOs, CIOs, CTO/CSOs, senior management executives, business leaders, and high net worth individuals worldwide.

​It is my hope that this article on eliminating taxation on all or most of the appreciation on early stage or high growth stock a CEO or other C-level or senior executive receives as part of your executive compensation package may be of benefit to those currently or in the future negotiating their executive compensation and equity package, or renegotiating in a retention situation. If you or any colleague of yours has a need in this area, please do reach out to me at rob@attorneyadelson.com.
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Restricted stock can be offered in lieu of cash to deliver immediate value with a strike price

2/25/2020

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Restricted stock can be offered in lieu of cash to deliver immediate value with a strike price much less than current fair market value. For senior recruits, technical or executive, you want to offer more to beat the competition – restricted stock does this. Robert Adelson, an executive compensation attorney, negotiates executive compensation; in one representative case, he worked with executive Steve Miles* to set up a vesting schedule to later grant him compensation in the form of stock.
executive counting the value of his compensation
By using its stock, the company avoided cash cost, and stock offers key advantages that make equity more valuable to employees than cash. Some of these benefits are:
  • Pre-IPO stock is valued at discount, and all stock is awarded without brokerage charge;
  • Stock offers the potential for considerable appreciation that cash lacks;
  • Appreciation is taxable at lower capital gains rates of 20%, with no withholding;
  • Stock offers the potential for future roll-over so that tax may be deferred indefinitely.

​In addition, restricted stockholders usually provide voting rights. As a result of the benefits of restricted stock, the use of this form of 
employee compensation has become very popular. Since the issue of founders' shares is deductible, the company can save money that would have gone to taxes by using stock for pay. The tax windfall can also be used creatively to enhance efforts to recruit or retain key people. This is done by sharing the company's tax windfall with employees. As an executive employment attorney, Robert Adelson works with C-level executives everyday and sees that when growth is the priority, cash savings are important, and building the team is critical – stock options provide lucrative advantages for both the company and the executive.

When working with executive Steve Miles, Robert Adelson negotiated his employment compensation and set up a several year vesting plan with attainable restrictions. This allowed the company to avoid cash cost and gave Mr. Miles compensation to work and look forward to down the road. Attorney Adelson also worked with the Company to grant Mr. Miles voting rights, like any other shareholder would have. A main advantage with restricted stocks is that they differ from other stock options and still retain some value if the price were to go down.

Attorney Robert Adelson frequently represents employees and executives negotiating their executive contract terms, stock, options, relocation, non-competes, termination and separation agreements. He also represents startup and smaller companies in software, medical device and other technology-based fields, independent consultants with compensation and stockholder arrangements, incorporation and liability protection, intellectual property protection, and in vendor, client and subcontractor contracting arrangements. Executive Steve Miles was a key employee and through the negotiation of his executive employment agreement; Attorney Adelson was able to grant him a lucrative and flexible form of executive compensation.

*All dates, client’s names and companies have been altered to keep confidentiality.
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