Consider Adding Separate Annual Limits on Director Equity Awards

Greg Gautam • February 5, 2014

As reported in Part 1 of our End of Year Plan Sponsor “To Do” Lists, employers that are adopting or amending equity-based compensation plans in 2014 should consider adding a separate annual limit on director equity awards.  Including a separate sublimit for director equity awards appears to be a trend that continues to gain momentum amongst executive compensation practitioners.  A recent survey published by Towers Watson indicates that 22% of Form 500 companies that adopted or amended stock plans during the 2013 proxy season added a separate limit on director equity awards.

Many employers have added the separate sublimit for directors to respond to the Delaware Chancery Court’s ruling in Seinfeld v. Slager.  In that case, the Court refused to apply the “business judgment rule” to dismiss a challenge to directors who approved large equity awards for themselves under a shareholder-approved equity-based compensation plan. The Court ruled that the plan did not impose “meaningful limits” on the maximum award that could be made to a director, and therefore, lacked sufficient definition to afford protection under the business judgment rule.

The questions for employers to consider in light of Seinfeld are whether to (1) add a separate annual limit for director equity awards; and (2) ask the shareholders to approve the limit to afford protection under the “business judgment rule.”

Employee burnout: what it is and how to prevent it

By Mardy Gould • May 24, 2024
Employee burnout has become an epidemic in today’s modern workplace. So much so that the World Health Organization (WHO) officially recognizes it as an “occupational phenomenon.”1 While many used to consider mounting workplace stress an individual employee problem, these days, it’s become an employer’s responsibility to prevent burnout before it hurts productivity and business performance—not to mention your employees’ physical and mental health. Luckily, you can prevent burnout from affecting your workforce in several ways. This article will explore the causes and signs of employee burnout and the steps you can take to create a positive work environment where employees feel safe from toxic stress levels.

Form 720 and PCORI fee FAQs

By Mardy Gould • May 23, 2024
If you're a small business owner, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization? Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI). PCORI is an independent organization the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness. Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA), must pay this fee by July 31 each year via Form 7201. This fee was initially set to expire in 2019, but Congress extended it through September 30, 20292, due to the Further Consolidated Appropriations Act of 20203.
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