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stock options

Loss of stock options: Abusive or oppressive?

The appeal of stock option plans (SOP) is undeniable. Indeed, by linking employees’ personal gains to the growth of the company’s share value, a SOP offers a flexible form of compensation as well as a long-term incentive program.

 

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A look at stock-based remuneration

Stock options are not really as complicated as one may think. In many cases, the challenge associated with the reporting of these benefits comes down to how the information is communicated to the payroll department.

 

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Deferred compensation: You can take it with you (sometimes)

Deferred compensation in the form of future bonuses, retention payments, and stock options has become a standard element of executive compensation. While there are countless variations of such plans, they are all designed to incent employees to remain with their employer, and to perform to the employee’s highest capability while he is there. In order to meet these goals, such plans will often include a deferral of the benefit once it is earned, in order to create an incentive to remain with the employer.

 

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Unexpected risks of stock option plans

Stock options and stock grants have become normal and expected elements of executive compensation in Canada. Stock options are generally granted to executive employees as a means of creating a common purpose or goal between senior employees and the company. The valuation of these options, and the employee’s entitlement to exercise them, has been an issue in many wrongful dismissal actions.

 

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Dealing with stock options on dismissal

A recent Ontario Court of Appeal decision dealt with a number of issues arising from the dismissal without cause or notice of a senior vice-president of an investment company. One of the more difficult issues addressed at trial, and considered by the Court of Appeal, was the trigger date for the right of the employer to re-purchase the employee’s two percent interest in the company.

 

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Ontario Court of Appeal deals with stock grants and termination

Long gone are the days when employees would receive pay cheques at the end of the week and possibly a Christmas bonus each year. Compensation for employees, particularly senior employees, has become increasingly complex as employers seek to incent specific behaviours among their executives. In addition, changing tax laws and the wild gyrations of the stock markets have made stock options more difficult to administer and less appealing to employees.

 

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Bonus entitlement on termination

In assessing either termination packages, or damages flowing from wrongful dismissal, counsel is often faced with a myriad of non salaried compensation payable to employees. This compensation includes items such as stock options, stock grants, non monetary benefits such as health and dental insurance, and bonuses. Over the years, the provisions of bonus plans have become more sophisticated, and more complicated. Employers have attempted, with the assistance of counsel, to include provisions for various contingencies in these bonus plans in order to better protect the employer. However, the more complicated the plan, the more difficult it is to assess whether or not a dismissed employee is, in fact, entitled to compensation for bonuses which might have been earned during the period of reasonable notice.

 

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