Understanding New York Executive Compensation

Our most recent economic crisis has placed scrutiny on executive compensation. As the landscape for executive compensation packages changes with the economy, it is important to hire an experienced executive compensation law firm to review your employment offer and provide compensation legal advice.

American Recovery and Reinvestment Act of 2009 (ARRA): The ARRA places restrictions on executives working for financial institutions. This law replaces many of the restrictions imposed in the Emergency Economic Stabilization Act of 2008.

Securities and Exchange Commission: The US Securities and Exchange Commission (SEC) require companies to file disclosure statements on executive compensation packages and policies. The Securities Exchange Act of 1934 forms the basis for financial regulations. In 1997, the Executive Compensation Act of 1997 (HR 1257) amended this Act giving shareholders more say in executive compensation. Since that time, there have been a number of amendments to HR 1257.

The SEC’s requirements on documents that need to be filed include the company’s annual proxy statement. This document discloses information regarding the amount and type of compensation paid to a company’s chief executive officer, chief financial officer, and three other highly compensated executive officers.

Internal Revenue Service: Deferred compensation is compensation paid to an executive within a year after the service was performed. Since Congress has been increasingly concerned about inflated executive compensation packages, Section 409A of the Internal Revenue Service Code was created to deal with deferred compensation. Deferred compensation packages must be in writing and compliant with Section 409A, even if they were created years ago. We can help you devise a deferred compensation plan compliant with Section 409A.

This information has been provided by the New York employment law lawyers of The Watanabe Law Firm at 212-486-7005.

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