Today's News

Today’s Federal Register contains final regulations regarding implementation of Section 417(a)(7), which was added to the Internal Revenue Code by the Small Business Job Protection Act of 1996. For those who do not know, Section 417(a)(7) provides that a plan may furnish the qualified joint and survivor annuity explanation after the annuity stating date, as long as the applicable election period is extended for at least 30 days after the date on which the explanation is furnished (i.e. a retroactive annuity starting date.) The regulations are quite complicated and I am sure there will be more about them here in the days to come.

The news is chock-full of pension funding articles which I will cover in a separate post today.

Sandra Block for USA Today provides this comparison–“Stock options vs. restricted shares: A case of risk vs. reward. reports a “Rift at Applied over stock options.” The article discusses how the debate over stock options vs. restricted stock (started by Microsoft’s announcement late last week) has created a “senior management rift” at Applied Materials, Inc., the Silicon Valley based chip equipment maker. However, grants of stock options are still occurring as reported by in this article–“Stock options still in favor at Oracle“–and by the Oakland Tribune in this article–“Oracle stock options rain down.”

Also, this very good article from the Seattle Times–“No to stock options? Microsoft move debated“–discusses the problem of “how to best link employee compensation to the interests of company shareholders.” The article quotes Paul Hodgson, a senior research analyst with the Corporate Library, a corporate-governance research and information service, as saying that “[r]estricted stock is only a good compensation tool if it’s tied to performance.” The article quotes Jack Marsteller, leader of the executive compensation practice at Towers Perrin in Los Angeles, as saying that restricted stock grants are becoming the “fad du jour” and quotes Matt Ward, chief executive of WestWard Pay Strategies in San Francisco, as calling them the “lay-low-and-don’t-get-fired award.”

Allan Sloan for the Washington Post has this lively op-ed: “Don’t Write Obituary for Options Just Yet.”

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