13. Current Regulatory Issues Impacting Compensation Design

It is impossible to work effectively in the executive compensation
area without a good understanding of the related tax, accounting,
securities and other regulatory issues. Sometimes these technical
issues are enabling, allowing you to more easily achieve an
important design goal. More often, however, the opposite is the
case and a successful path is only achievable with a sound understanding
of the pertinent regulatory facts and forces. As the
authors point out, many common design features of contemporary
executive compensation plans are a direct result of regulation.

The authors label the United States as a “laboratory for
complicated plan design.” And given that U.S. executive compensation
plans tend to serve as an important benchmark for most
other countries, understanding the rules of the road in the U.S. is
key. The chapter, which could easily have been dryly factual and
literal, is actually quite colorful and easy to follow. The authors
discuss all of the major accounting, tax and securities issues that
are in place or under consideration, and then offer a myriad of
examples of how these various issues come to life in contemporary
executive compensation plan design.

The authors conclude by noting that “the influence of regulation
on compensation strategy is immeasurable” and that “the
most disquieting aspect of regulation is that it is constantly in flux;
what applies in one era is overturned in the next.” This is what
makes both this chapter and topic very interesting and highly
relevant. —Editors



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