Monday, June 27, 2011

4 legal pitfalls startup owners must face

4 legal pitfalls startup owners must face

Posted: 27 Jun 2011 06:00 AM PDT
(Editor’s note: Curtis Smolar is a partner at Ropers Majeski Kohn & Bentley. He submitted this column to VentureBeat.)

A reader asks: What types of legal issues do I need to consider when starting my company and how much will it cost?

Answer: As an entrepreneur you have your work cut out for you. There are many of legal pitfalls that you need to overcome, in addition to the day-to-day challenges. A lot, of course, will depend on the sort of business you plan on running. In general, though, there are five issues to keep in mind (detailed below). As far as cost, that’s often negotiable and many attorneys will agree to do these agreements at a reduced rate to get your business.

Business creation documents – No matter what kind of business you’re starting you’re going to have to decide on a type of corporate structure. Some of the basic types are partnerships, limited liability companies (LLCs), and corporations. Make sure you choose the appropriate corporate entity for your needs.

For example, if you want investors, but do not want to spend a lot of money on the formation, a standard corporation may be the best bet for your corporate structure. A basic corporation gives shareholders limited liability, but has two levels of taxation, one on the corporate level and one on the individual level.

The basic corporation, however, is easier to create share and capitalization tables from because the percentage ownership, or a “share”, is defined by individual state laws and exists without having to be defined by a contract.

A limited liability company, meanwhile, needs to have a detailed contract defining the percentage of ownership of the company. This contract will translate to more money for you, the entrepreneur.

HR employment agreements – Once the entity is created, you need to get people working. As discussed in previous columns, hiring and firing people has a lot of potential pitfalls. So it makes sense to plan for the worst in these situations.

Set up uniform employment contracts, which:

Do not discriminate against people based on any of the protected classes as defined by federal or state law;
Define the scope of the employment;
Say if the employment is for a term or “at will”;
Assign the pre-corporate formation intellectual property to the company;
Assign all subsequently created intellectual property to the company; and
Protect the corporate intellectual property from disclosure.
The last two categories of protecting intellectual property of the company can be accomplished by drafting non-disclosure agreements, and Proprietary Invention Assignment Agreements.

Insurance - Getting insurance for your company is a bet worth taking, given the potential unpleasant surprises of not being prepared. Again, your needs will vary depending on your company, but among the standard offerings are:

Comprehensive General Liability Policies (“CGL”) – A CGL policy is usually geared towards protecting a company from personal injury;
Directors and Officers (“D&O”) Insurance – D&O insurance may cover the wrongful acts of the officers and directors of a company;
Advertising Injury Insurance – Insurance that covers defamation, invasion of privacy, copyright infringement and other intellectual property injuries. (The advertising injury is usually a part of a larger policy, like a CGL, and not a policy onto itself.); and
Employment Practices Liability Insurance (“EPLI”) – The EPLI is a specialized insurance policy protecting companies against employment lawsuits.
Customer contracts – To be able to sell efficiently, a company needs to create agreements that explain to their customers the terms of the transaction. These types of agreements can take two forms:

Account Signup Pages –where you have the customer input all of their relevant information and agree to the terms of use. (This is also the place where you can monetize your venture by requesting credit card information.)
Terms of use – This is the place where you see all the legalese, the disclaimers and the choice of forum clauses. The Terms of Use create the stipulations of the contract with the customer, that often include a license or an assignment of a user’s content to a web site.
There is a careful balance you need to strike with the customer agreements. You want them to be comprehensive, but you also want to avoid the appearance of being unfair.

Intellectual property protection and agreements – Once you have your company up and running, protect your intellectual property through trademarks and copyrights. These will require you to work with someone who has filed a copyright or trademark in the past. This process is filled with potential risks, so a good attorney is essential.

Startup owners: Got a legal question about your business? Submit it in the comments below or email Curtis directly. It could end up in an upcoming “Ask the Attorney” column.

Disclaimer: This “Ask the Attorney” post discusses general legal issues, but it does not constitute legal advice in any respect. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. VentureBeat, the author and the author’s firm expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.

PRESENTED BY: Executive Leadership, LLC SPECIALIZING IN: Career Transformation or Change and Executive Coaching or Development - (908) 822-9655 WEBSITE:

Sunday, June 26, 2011

When A Career Veers Off Track

When A Career Veers Off Track


Mid-career derailment can happen any time, but in today's economy there is no room for complacency. With job opportunities harder than ever to find, it's a particularly rough time to be fired or demoted or to hit a career plateau. You can reduce your risk for derailment by paying attention to your value and effectiveness and by focusing on interpersonal skills, adaptability, team leadership and bottom-line results.

Based on the Center for Creative Leadership's ongoing study of executive derailment with clients around the world, here are 10 ways to avoid these pitfalls:

Ask for instant feedback. When walking out of a meeting, ask a colleague, "I think that could have gone better – what could I have done differently?" Listen to the response. Don't defend or justify your actions and don't interrupt. Sean Fowler, assistant vice president with insurance company IAT Group in Cold Springs, Fla., uses feedback from his co-workers as a reality check. "You have to develop a bit of a thick skin," Mr. Fowler said. "Once you get past the initial shock, you really come to appreciate it. It's a long-term effort made up of small steps, not a leap."

Increase self-awareness. Become a student of your own behavior. Take stock of how you feel about your work and how you react when you are pushed outside your comfort zone. Explore the values that matter most to you and use them as an anchor during times of change, transition and stress. Amy Gillard, owner and operator of Gillard Enterprises, an event-management business notes that selecting work which is not the right fit will only create challenges with clients down the line. "Self-awareness is key in my business. You have to know who you are and what you have to offer," she said.

Pay attention to organizational culture. To stay aligned with your organization as it morphs and changes over time, you need a clear understanding of the prevailing culture. Analyze how decisions get made and think about the underlying assumptions that guide the organization as it responds to challenges and opportunities.

Use empathy. Your direct reports, your peers and even your bothersome boss are all human beings worthy of your respect. Listen without judging. Take the feelings and perspectives of others into account. Don't use humor inappropriately and always keep private conversations private. You'll end up with stronger relationships.

Learn to listen. Hearing isn't the same as listening. Turn away from your email and concentrate on the person talking to you. Don't be passive. Ask questions to make sure you understand. Stay in the moment and take notes to help you remember key points. Show people you're really hearing them. Air Force Col. Trent Edwards, Commander of the 28th Mission Support Group at Ellsworth Air Force Base, learned to listen differently in response to feedback from his team and his family. He realized he was using a "war zone" mentality in non-war zone settings. With tours in Afghanistan and Iraq, Edwards describes his previous approach as "very action-oriented. Everything was always go, go, go. Now I try to listen with more patience, with an open ear to try to hear what is being said and also what is not being said."

Collaborate. Try to not be the Lone Ranger. Be open and willing to disclose your decision-making process to others, along with important facts and feelings. Your influence and effectiveness will increase.

Deal with problem employees sooner rather than later. If a direct report's behavior or lack of skills threatens the success of your team, confront the problem head on. Don't let it fester. These kinds of problems almost never heal themselves. Document specific shortcomings and either dismiss the employee or create a development plan for improved performance. The cost of carrying poor performers can have a ripple effect across the organization – destroying morale and dragging down productivity.

Delegate authority. Don't keep your employees tied down and stuck in the same roles and responsibilities. Allow them to test their wings. Assign stretch projects you think they can handle. As they prove themselves, increase the complexity of the assignments. Give adequate guidance and follow up to see how they are doing. Debrief shortfalls and use them as a learning opportunity. Above all, acknowledge positive outcomes.

Focus on the task at hand. While it's great to have a development plan and to work on skills you will need down the road, don't forget that your main job is just that – your main job. Organizations value managers who get work done. Focus on what you need to accomplish each day. Bring jobs to a close. Tie up loose ends. Document outcomes. Get closure, and…

Break out of a rut. Learn from the mistakes that you and others make. Stop talking about how things were done in the past. Bring a new idea or solution to the table. Break away from your lunch cliques. Identify a rut you are in and get out of it.

Become known for your skill at adjusting to change, building strong relationships, leading effective teams and getting results. Your colleagues will appreciate it – and you'll reap the professional rewards.

Executive Coaching with  Executive Leadership, LLC specializes in helping executives get their career back on track. Contact CB Bowman @ 908 822-9655 or,

Why You Work More, Enjoy It Less

MAY 8, 2011

Why You Work More, Enjoy It Less


Businesses expect a lot more out of their employees these days, as a visit to Rioja, the top-rated Denver restaurant, can demonstrate. If you like Rioja's hazelnut tortamisu, thank pastry chef Eric Dale. And if you happen to pop your head into the bakery room and admire the tile job on the floor, you can thank him for that, too.

Ever since his boss, chef Jen Jasinski, discovered that Mr. Dale is handy, she's had him doing double duty as the maintenance man. He has spent hours repainting the oven, fixing the plumbing and installing a garbage disposal. And that's just the start. He used to manage the dessert operation at one of Ms. Jasinski's restaurants; now he's up to three. All told, Mr. Dale says, his hours have expanded to more than 60 a week.

SmartMoney's Anne Kadet explains why tough economic times are vastly expanding the role of some jobs, without the benefit of additional pay.

In this new era of the superjob, everyone does windows, and anyone who gripes about working too hard will hear an even hairier tale from the exec on the next bar stool. Emboldened by an unemployment crisis that's only now easing up, businesses of all sizes have asked employees to take on extra tasks that have little to do with their primary roles and expertise -- with engineers going on sales calls, accountants pitching in on customer service and chief financial officers running a division on the side. And some believe this shift is permanent, as the quickening pace of change demands more flexibility from everyone at the office.

Management consultant Rich Moran, whose clients have included Apple and AT&T, says employees will do whatever it takes to help their company compete: "Job descriptions are written in sand, and the wind is blowing."

Some workplace experts say the superjob is the logical next step in management's quest to make the workplace more cost efficient. The latest shift started when businesses redistributed the workload during the recession; last year's nascent recovery intensified the process. In a recent survey by Spherion Staffing, 53% of workers surveyed said they've taken on new roles, most of them without extra pay (just 7% got a raise or a bonus). Now that sales are picking up, there's even more work to do, but companies are reluctant to hire, say human-resources experts. Some are anxious about what the economic future holds, while others are seeing their profits increase now that their work forces are leaner.

CEO pay rose last year by about 11%, according to the Wall Street Journal's annual CEO pay survey. Kelsey Hubbard talks with WSJ's Erin White about the results.

As hard as it can be to keep up, employees can benefit from the trend. Research shows that many successful leaders grew the most through "stretch experiences," says Seymour Adler, a senior vice president at Aon Hewitt's talent-and-rewards practice. Still, even the most hard-nosed bosses know workers can be stretched only so far. Indeed, a recent survey from the Conference Board found that just 43% of Americans are satisfied with their job -- a record low.

Assigning new roles to existing employees can be a smart move, says Debbie Zmorenski, a productivity consultant at LSA Partners in Orlando. But during the recession, instead of thoughtfully reassigning tasks based on a careful assessment of employees' skills, many companies redistributed the workload willy-nilly and provided little training. When you send a talented but shy IT specialist out to do sales, says Ms. Zmorenski, "you're setting him up to fail."

Taking on extra work doesn't necessarily mean a promotion. Some executives find themselves spending time on chores that used to be handled by junior staff. When Philadelphia-area copywriting and marketing consultant Carolyn Frith served as a marketing head for a home-fixtures manufacturer, she didn't mind proofing the price book while her product manager went on maternity leave. And when the security guard got laid off, and it fell on her to dial in the security codes for the parking-lot gates? Well, why not? The only problem: "It was hard to find time to plan strategy and meet with customers," she says.

Phil Foster
If you're wondering why it's hard to juggle new roles, ask a neuroscientist. Recent research suggests that multitasking can reduce productivity, because it takes a ton of mental energy to switch from one task to the next. The sheer number of hours demanded by the superjob also can impair your performance as your brain gets fatigued, says Susan Koen, an organizational psychologist and consultant whose clients include Pfizer, Alcoa and Procter & Gamble.

To their credit, some employers are doing more to help their superstars. And companies that saw a rebound in 2010 are helping executives with time management and delegation.

Another popular tactic: recognition programs that reward employees for taking on extra work. Major companies are turning to software "wizards" that dole out laurels on preset, automated schedules, says Adrian Gostick, a co-author of "The Carrot Principle" and a former vice president at employee-recognition consultancy O.C. Tanner.

Of course, the ultimate responsibility for workload management falls to the employee. Experts say that in many cases, employers have no idea how many tasks they've loaded on one person, so workers have to "manage up."

Chris Perry, a Parsippany, N.J.-based brand manager responsible for a $65 million product line, says he's thriving after a recent promotion, thanks to his careful efforts to set limits. In order to spend evenings with his wife, he starts his workday early -- and often sends a few morning emails to make sure the effort gets noticed. When he's overwhelmed with projects, he asks top brass to clarify their priorities.

Still, Mr. Perry admits he's often tempted to work late when he sees his co-workers doing so. "It's hard to play that game of impression versus reality," he says.

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
www.djreprints.comPRESENTED BY: Executive Leadership, LLC SPECIALIZING IN: Career Transformation or Change and Executive Coaching or Development - (908) 822-9655 WEBSITE:

Retirement Plans Make Comeback, With Limits

Retirement Plans Make Comeback, With Limits


Many U.S. companies that during the recession cut 401(k) matching contributions—one of the most valuable employee benefits—are beginning to restore them.

In an effort to retain top employees, many U.S. companies that cut back on one of the most valuable employee benefits during the recession, the 401(k) matching contribution, are beginning to restore it. Kelly Greene has details.

But a number of firms are contributing less than before, are linking contributions to profits or are making workers save more on their own before kicking in, say benefits consultants.

United Parcel Service reinstated its 401(k) match in January after having suspended it in 2009. But the delivery giant changed the way it doles out the benefit: Instead of matching what employees defer up to 3% of eligible pay, UPS will now match half of what they defer, up to 5%. Its top contribution is now 2.5% of pay, compared with 3% in 2008.
From SmartMoney

Use the SmartMoney Retirement Planner to see how your 401(k) match adds to your assets.

"The match did change slightly, to encourage employees to defer a larger percentage of their own pay," said Norman Black, a UPS spokesman.

Some UPS employees were grateful to be getting anything. "I was absolutely delighted when it was reinstated," said Peggy Gardner, UPS's director of customer communications. "I know it was very important to the employees in my group."

Employers of all sizes are moving to "a smaller, discretionary match" to save money, said Jeanne Thompson, a vice president at Fidelity Investments, which is the custodian for 11 million employee accounts.

MGM Resorts International Inc. suspended its 401(k) match for 2009 and 2010. In February, the casino operator reinstated part of it, but with less-generous terms. Now, employees are eligible to receive 50% of what they contribute up to the first 6% of eligible pay, with a maximum match of $500 for the year, said an MGM spokeswoman.

Before the suspension, the company matched dollar for dollar up to 6% of eligible compensation, says the spokeswoman. MGM hasn't determined how long the $500 cap will remain in place, she says.

The 401(k) is a tax-deferred account that allows workers to save for retirement, with companies often matching workers' savings up to a certain level. During the recent recession, almost one in five U.S. companies with at least 1,000 workers suspended matching contributions, according to consulting firm Towers Watson.

With traditional pension plans being phased out and concerns mounting over the long-term viability of Social Security, Americans increasingly view 401(k) accounts as crucial. A BlackRock Inc. survey last year found that 401(k) plan participants considered the employer match more of an influence on their savings rate than their household budget was.

Companies are keenly aware of the importance of 401(k) plans. A survey of 600 human-resource professionals by the Society for Human Resource Management, set to be released June 26, has found a significant increase in the number of employers that offer 401(k)s—93% this year, up from 83% in 2008.

Meanwhile, according to a June 8 survey by Duke University and CFO Magazine of about 500 chief financial officers, 43% of businesses that had slashed their 401(k) matches expect to restore them in the next 12 months, or already have done so, compared with 12% at the same time last year.

For example, Columbus, Ohio-based Pinnacle Data Systems Inc., which designs, builds and services high-end computer and telecom gear, reinstated its 401(k) match last year after dropping it in 2009.

"Our people are valuable resources to us," says Nick Tomashot, chief financial officer. "Anything we can do to encourage retention is something we want to do."

Eclipse Inc., a Rockford, Ill. , industrial-heating equipment manufacturer with 700 employees, suspended its match in early 2009 and restored it, at the full prior level, in April 2010. The big reason: It worried about losing highly skilled welders and machinists to other nearby aviation-industry suppliers. "There is quite a bit of competition for a skilled work force," said Gregory Bubp, Eclipse's chief financial officer.

FedEx Corp. suspended its 401(k) match in February 2009. Later that year, it said it would reinstate half of the match, and it restored the rest on Jan. 1, 2011. "We restored it to the original," a spokesman said.

Yet many companies, facing a slowly improving job market, seek to balance the need to retain highly skilled workers with the need to limit costs.

"A few have made [their matches] discretionary," says Robyn Credico, a senior consultant at Towers Watson. "That's so you don't get into trouble if the economy falls apart again."

Shawn Fegley, a research analyst with the Society for Human Resource Management in Alexandria, Va., expects more employers to consider basing their 401(k) matches on profitability in coming years, in part to avoid cutting benefits in the future.

"Employers don't want to make commitments and then remove them," he said. "If they have a terrible 2011 and have to take away matching contributions again, it doesn't send a good message to the work force."

Some companies still don't feel financially able to restore the match—and are losing employees as a result. Woodgrain Millwork Inc., a Fruitland, Idaho, maker of windows, doors and moldings, has reversed a 5% wage reduction to salaried employees but hasn't yet restored its former 401(k) match of 50% of up to 6% of pay.

"It's a regular conversation topic both within ownership and among employees," said Chief Financial Officer Greg Easton. "Our biggest challenges are in the accounting and information-technology pieces, because those skills are transferrable. There are a few select areas where we've lost a couple people as a result."

Getting the calculation right has been challenging for some companies. Rudolph Libbe Cos., a Walbridge, Ohio, building and maintenance contractor that has 360 workers covered by a 401(k) plan, suspended its match in 2009 amid three rounds of staff furloughs and buyouts.

After landing three big projects last year, its management is debating whether and how to restore the match, said Chief Financial Officer Robert Pruger. The company is considering enrolling workers automatically, and is exploring the possibly of linking any match to profits to cut back on "absolute costs we know we'd have to pay," he said.
—Dana Mattioli, Joann S. Lublin and Anne Tergesen contributed to this article.

Write to Kelly Greene at

PRESENTED BY: Executive Leadership, LLC SPECIALIZING IN: Career Transformation or Change and Executive Coaching or Development - (908) 822-9655 WEBSITE:

Wednesday, June 22, 2011

The Race for Africa: Investment and Job Opportunity

The Race for Africa: Investment and Job Opportunity

By: Peter Felix Date: Wednesday, June 08, 2011
The previous use of that phrase referred to a dash for African land by European nations at the end of the 19th Century. Colonial Africa became the bastion of white planters, hunters, miners, railway builders and bankers. Yet the continent remained essentially poor, its riches enjoyed by the foreigner but hardly by the local inhabitants.
Then came independence from foreign rule and a period of, in some countries, almost 50 years during which Africa has languished in a mire of political instability, corruption and civil wars. Only the gambler or the foolish were prepared to invest when they might have little control over the outcome.

Today, however, Africa is experiencing a second metamorphosis, this time hopefully much more to local advantage and in the long term interest of the continent. Foreign investors have woken up the realization that not only is Africa rich in commodities, it also represents a huge market of potential consumers.

The Wall Street Journal article, U.S. Companies Race to Catch Up in Africa, reminded me how much the situation has changed since I spent time working in North Africa during the 70s. The whole continent seems to have come alive with possibilities, just as in Latin America, the former "banana republics" are giving way to prosperity and development.

Now American, European and especially Chinese companies are investing to engage in massive development and natural resource projects. All the major brand names are to be found not just in South Africa but in the lesser known countries of Mozambique, Bortswana, Senegal, Ghana and Togo. GE is now running its African operations out of Kenya whereas Google has established a new office in Uganda.

Progress doesn’t come overnight but if Africa today is where India and China were 10-15 years ago then the opportunities should be vast. For executive search consultants servicing executive demand from 54 disparate African countries the challenge will be very real. For ambitious and adventurous executives Africa beckons once again.

PRESENTED BY: Executive Leadership, LLC SPECIALIZING IN: Career Transformation or Change and Executive Coaching or Development - (908) 822-9655 WEBSITE:

How to Enter Foreign Markets: A Strategy Overview

How to Enter Foreign Markets: A Strategy Overview

By: Ian Swanson Date: Thursday, June 02, 2011
When entering new markets you have to start with a clearly defined strategy and an honest assessment of your organization's capabilities. Without this, any path forward is flawed.

I have seen too many businesses say they are expanding into international markets, without clearly defined objectives and processes to achieve success, 'well these are big emerging markets, with a lot of people, and there is not much growth in our home market...' Hardly a strategy.

The next step is to thoroughly assess the demand and competitive landscape for your product or service; is the product or offering that you have unique in some way, are consumers already aware of your product (and do they like it), and if there are competitors, are there barriers to consumers switching or barriers to entry, etc.? You will begin to see the picture, and the decision tree continues.

Capability and Partnerships

The second important consideration when entering foreign markets is to complete an assessment of the skills and capabilities available to your organization. Do you have experience of moving into international markets previously, is your product accepted in that country or are there cultural or other barriers to entry?

A great example of this type of issue was when big box stores (also known as superstores, such as Walmart and Target) moved into Asia 20 years ago. They came with the usual large family size packs that offered a month's supply for a good price. Two immediate problems were that a) consumers lived in small homes and did not have room to store such items (or freezers...), and b) most didn't own a car and so getting to these stores which were built on the outskirts of town was also a problem. As you can see, an assessment of the service and local environment becomes critical.

From this you will then be able to develop a detailed entry strategy. Most likely this will, at least initially, entail working with a local partner or distributor. While this means sharing in the revenue, it involves the least risk. The relationship can be expanded or terminated as you develop your product locally. This is the approach I would recommend if you have a small budget. Just make sure you have someone on your team who knows the market and can manage the relationships!

At the other extreme, if you have some unique, possibly patented product, and the demand is significant, then you may go with a more aggressive investment model to protect your IP and maximize earnings (though the start-up costs can be high). In such cases you may set up a local business unit directly, or form a Joint Venture which gives you some control over the direction of the business.

Local Knowledge

In all these cases, local knowledge is imperative. And when I say local knowledge, this means culture, relationships and industry. The upfront investment in time and effort to understand the marketplace, while it may seem to slow the process down, will pay big dividends down the road. This process should not be circumvented or short changed.

Equally, you need to make sure that the source of this insight is on your payroll and not someone else’s. In that regard, bringing in the services of someone who has been there, done that (if it does not exist internally) and has existing relationships is the only way to go.

Expat vs. Local vs. HQ

The context of the expat has changed a lot over the last two decades. Many of the people who play these roles today are either a) paid locally as locals and are living in the country, or b) are based in HQ and then travel to the markets on extended trips. Having followed both approaches in my past, there are pros and cons to both.

Personally, with air travel improvements, and the cost of relocating families, etc., I see that the approach of extended trips to markets is perhaps getting more common. After all, you can now fly non-stop from New York to Singapore in 18 hours...

Another benefit to being based in HQ, is that assuming the company is making a significant investment in these markets, you probably don't want this person sitting thousands of miles away where management and support staff can't meet face to face to discuss the business and issues that will arise. One way or another, this person will spend a lot of time in HQ.

However, eventually it will be imperative to hire local permanent staff to run operations following initial entry, and managing the talent pipeline will become equally important to a well formed long-term strategy.

BlueSteps Executive Guest Writer

Ian Swanson is a senior global operations and finance leader with a track record of success who can help build, strengthen and drive business results across international markets. Having lived and worked on three continents, Ian possesses broad expertise in driving and supporting business growth in emerging international markets within the consumer products and healthcare industries, and has a proven track record of adding value to growing organizations through improved systems, operational efficiencies, restructuring and acquisitions, contact Ian at

5 Questions to Ask Yourself if You Want to be CEO

5 Questions to Ask Yourself if You Want to be CEO

By: Sarah Wright Date: Monday, June 06, 2011
Insider-outsiders – internal employees who have maintained an outsiders objectivity and drive for change – are often consider the ideal candidate for the CEO job, but how can you gain that mentality? John L Bower, professor at Harvard Business School recently outlined the questions you should be asking yourself to get to the ceo executive position, and here are our top 5 (see full video below):

Why are you being hired?
You should have a good understanding of why a company is hiring you. Firstly and somewhat obviously, to do the job, but there are more important things you should be looking for. Do they develop their staff, are there executive career paths to follow, can you work your way up, or will vertical progression be stalled in a ‘velvet coffin’ situation?

Do you meet your numbers?
It is all well and good talking about growth, development and vision but you need to perform and perform well. If you don’t have a reputation of meeting your commitments you won’t be getting in or possibly anywhere near the game.

Are you transparent?
Are you a straight talker, or do you skirt around the facts? Do you take responsibility for mistakes or do you make excuses? Companies need leaders who get down to the facts, admit there was a problem and know what the solution is. There isn’t time to skirt around the issues and play blame games, if you have a reputation for spin you may have a problem.

Do you manage up?
There seems to be a misconception about bosses, that they’re there to help you, well they’re not. Constantly approaching your superior with issues means that when they see you coming they think “uh oh here’s a problem” or “They’re going to ask me for something”. Don’t approach with problems come with solutions, help your boss, help grow your organization.

Are you developing a network that expands beyond your own division?
To be a good insider-outsider you need to be able to look at your company objectively. There is a whole world of people out there beyond the walls of the office, how better to develop a view of the world outside of your company than to go and talk to them. Talk to your customers and vendors, you might learn something. Develop yourself as someone who contributes by taking on projects in your local community, take what you’ve learned and apply it to your organization.

Monday, June 20, 2011

New Michigan Law Changes Taxes and Withholding on Retirement Income

New Michigan Law Changes Taxes and Withholding on Retirement Income

6/14/2011 Jay A. Kennedy, Mary Jo Larson
The way in which Michigan taxes pensions and other retirement income will change significantly beginning next year. A new withholding requirement also affects payors of that income.
Retirement Income Exemption is Limited
The new rules phase out the Michigan income tax exemption for pension and retirement income, depending on birth date and total income level. The rules are tied to the birth date of the older spouse when a joint return is filed, regardless of which spouse receives the pension and retirement income.

Here are the highlights:
Taxpayers born before 1946: The tax treatment of retirement or pension income generally do not change. Government, military, and railroad pensions, as well as Social Security benefits, are completely exempt from taxation. A portion of pension and retirement income from non-governmental plans continues to be exempt from tax (up to $45,120 for single filers or $90,240 for joint filers in tax year 2010, and adjusted for inflation). This latter exemption is reduced by the amount of any governmental, military, or railroad pension benefits.

Taxpayers born in the years 1946-1952: The current exemptions for Social Security income and military and railroad pensions remain in place.

Until the taxpayer reaches age 67, the exemption for all other pension and retirement income, including governmental retirement income, is reduced to $20,000 for a single return or $40,000 for a joint return. After the taxpayer reaches age 67, the exemption amount applies to all other income, including non-retirement income.

Regardless of the taxpayer's age, the $20,000/$40,000 exemption is unavailable if total household resources exceed $75,000 for a single return, or $150,000 for a joint return, or if a taxpayer claims the deduction for a military pension or railroad pension. The taxpayer may still use the standard personal exemption, regardless of age.

Taxpayers born after 1952: All exemptions for any type of pension or retirement income other than Social Security income and military and railroad pensions are not available until the taxpayer reaches the age of 67. Then, the taxpayer may choose between an exemption ($20,000 for a single return or $40,000 for a joint return) against all types of income, including Social Security, retirement and non-retirement income or a deduction of 100% of Social Security income plus the standard personal exemption.

The $20,000/$40,000 exemption is unavailable if total household resources exceed $75,000 for a single return or $150,000 for a joint return, or if a taxpayer claims the deduction for a military or railroad pension.

New Withholding Tax Requirements

The new law requires any person who disburses pension or other retirement payments to withhold income tax. The withholding is at the Michigan individual income tax rate, which will be 4.35% next year. Withholding is not required on any part of the payment that "is not expected to be includable" in the recipient’s gross income.

Because the exempt amount of pension or other retirement payments depends on household resources, the birth date of the older spouse and other factors, determining what part "is not expected to be includable" would be very difficult. It is not yet clear what steps will need to be taken by those who disburse pension or other retirement payments to ascertain this amount. We are hoping for prompt guidance from the Michigan Department of Treasury on this issue.

In the meantime, if you have questions about the changes in the tax law, please contact Jay Kennedy ( or 248.784.5180), Mary Jo Larson ( or 248.784.5183) or any other member of the Tax or Employee Benefits groups at Warner Norcross & Judd.

Sunday, June 19, 2011

How to Find a Hiring Manager’s Contact Information

How to Find a Hiring Manager’s Contact Information

Posted: June 10, 2011

You’ve applied for a job opening through a job board, corporate careers site, or to anonymous email address in hopes of getting a call back and maybe even landing an interview. But a week or so passes by, and you’re still waiting to hear about your application.

How do you follow up when the initial job advertisement didn’t list any contact information? It’s time to start researching. Here’s how:

Scour the company website for a name. Look through the “About us” section of the organization’s website to determine the name of the hiring manager. You might even be lucky enough to find a company directory of employees with names and email addresses.

Call the receptionist. Even if the job ad says, “No calls,” you can still call the front desk in hopes of getting a name of the right person. Depending upon the company’s policies, this person may or may not be able to give you the individual’s contact information, but being polite and friendly to the secretary can go a long way.

Use social networks. Many professionals are now active on Twitter, LinkedIn, and Facebook and list their job titles in the biography section of these sites. If you happen to find the correct individual, click on any links they’ve provided to see if you can figure out their email address. It may also be listed in their headline, biography, or contact information on the site.

Make use of online tools and search engines. Websites like Jigsaw are a good place to start when looking for a hiring manager’s contact information. If you can’t find his or her email address through online directories, type key words and phrases into Google (or another search engine) to try to uncover the correct address. For example, if you know the hiring manager’s name is Jane Doe, type “Jane Doe” “” If you do not know her name, type “hiring manager” or “department” and “XYZ Company.”

Call after hours. After employees have gone home for the day, the automated answering service picks up the company line and often provides a directory for individuals wishing to reach its employees. Listen through the departments to determine who you’re looking for. Once you’re redirected to a voicemail box, take note of the name the individual provides that you can then research online.

Look at other company email addresses. If you already know the hiring manager’s name, you can often guess their email address by modeling it after other addresses. For example, if you find listed on the company website, it’s likely that the hiring manager, Jane Doe, has the email address If it’s not correct, it will often come back to you—no harm done. You can also use free email verifying tools, such as, to determine if the email address is correct before you send it.

What’s your favorite tactic for figuring out someone’s contact information? Send to

Saturday, June 11, 2011

LinkedIn could standardize job applications with new tool | VentureBeat

LinkedIn could standardize job applications with new tool | VentureBeat

Image representing VentureBeat as depicted in ...
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LinkedIn could standardize job applications with new tool | VentureBeat…

Tom Cheredar is a staff writer for VentureBeat and freelance journalist.

LinkedIn is poised to debut a new plug-in allowing job seekers to apply for available positions directly on an employer’s website, reports Gigaom.
With the “Apply With LinkedIn” plug-in, the company is attempting to standardize the job application process by using a job seeker’s LinkedIn profile as a resume.
Currently, most companies handle job applications by using a third-party service, hiring a recruitment agency, setting up their own official application or a combination of all of those options. LinkedIn’s application process could quickly end up as the most effective, since it has a professional social network to assist the recruiting.
LinkedIn is reported to be working with several companies to offer the plug-in, which should be available at the end of the month.
When it does go live, job seekers should see a button next to job listings on the company’s official employment webpage. Upon clicking, applicants will have the option to edit their LinkedIn profile, alter contact information and then be prompted to answer additional questions. Other job listings and personal contacts affiliated with that particular company will be displayed after the application has been submitted.
Also, employers will have the option to alter the application by adding predetermined questions (relocation, salary requirements, legal citizen, etc.) and/or customized questions. Completed applications can be sent to an email address, URL or JavaScript callback.
Clearly, LinkedIn sees facilitating the job recruitment effort as an area that has major potential to generate revenue. After making headlines with its recent IPO, the company is under pressure to begin showing steady growth, which it could easily do by becoming the standard for employee recruitment.

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Friday, June 10, 2011

How to Ask For the Salary You Deserve

How to Ask For the Salary You Deserve

MON, MARCH 28, 2011 AT 11:39
Simon North founder of Position Ignition offers some career and salary negotiation advice on making sure you get what you’re worth. This is an article we wrote for STV (Scottish Television).

Asking for the salary you believe you deserve right now is a fairly sensitive subject, particularly in today’s uncertain economic climate. Many businesses will be focussing on managing their costs tightly and not particularly interested in inflating any of these costs by increases to anyone’s reward package.

It’s probable that there have been downsizing and structuring exercises going on particularly as restructuring costs tend to be fairly substantial and often have to be paid up front. All of these points make it a difficult time to be asking for a rise and you should bear these in mind but remember they are not reasons to give up.

If we look at this from an organisational point of view in the medium to long term, the company will want to keep hold of its best people and retention is always a tough challenge for organisations. Knowing who is good and worth keeping is as much an art as it is science. Many organisations do not really understand the level of talented people that they employ.

It’s important to understand your value when asking yourself “should you be worth more”. How familiar you are with the market rate for what you do and where you are relative to those benchmarks will give you a good idea of what you should be worth to an organisation.

You need to look carefully at how good your current performance is, perhaps what the organisation or your managers have said about how well you are performing and how valuable your contribution is to the business.

There is also the question of potential and how much you know of the view your organisation has of your potential. Very often we don’t know or have a completely different view to the organisation. If you don’t research this with trusted colleagues or mentors you could find yourself fighting a losing battle.

When it comes to talking about reward for our work, we are all too often fixated with money. One way of making this easier on the organisation is to request a bonus scheme as this may be more acceptable in the current climate particularly because it is based on delivering on your objectives and targets.

Perhaps there is another form of reward you would prefer and be considered more acceptable to a cash-strapped employer, such as more flexibility on hours, working fewer hours, having more time off etc. Often organisations can offer benefits believing they cost little but the value to the employee may be very different.

It’s important to know where your organisation is going in the future as this will indicate whether a pay rise or further benefits are feasible or not. You need to find out where you fit in an organisation’s future plan and if you are key to their strategy as this will provide some leverage in your negotiations.

You may also find out that you don’t have a future at all and perhaps it’s time to reconsider, wither way this information is crucial to your next steps and it’s better to know sooner rather than later."

Author: Simon North is founder of Position Ignition the career consultancy and advice experts.

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Executive Leadership, LLC: How to Negotiate a Pay Rise - Salary Negotiation T...

Executive Leadership, LLC: How to Negotiate a Pay Rise - Salary Negotiation T...: "How to Negotiate a Pay Rise - Salary Negotiation Top Tips THU, JUNE 9, 2011 AT 12:00 Asking for a pay rise or negotiating a salary when y..."

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How to Negotiate a Pay Rise - Salary Negotiation Top Tips

How to Negotiate a Pay Rise - Salary Negotiation Top Tips

THU, JUNE 9, 2011 AT 12:00
Asking for a pay rise or negotiating a salary when you first join a new company is tough. Knowing what do’s and don’ts to follow for each different situation and scenario is also very challenging and there aren’t a set of generic rules you can simply follow that will be guaranteed to work. Ultimately it really depends on who you are negotiating with and also what you feel is right for you. However to give you a few pointers and to get you started here are some tips and tricks on salary negotiation that we gave to someone we worked with and who ended up increasing his salary by over 40%:

Last month, I helped someone with their salary negotiation. They wanted a pay rise and felt like they deserved it. However, they had no idea how to approach the subject or situation. I put forward a range of ideas and tips some of which are outlined below. There is no guarantee that these will be the right tips for you to follow in your particular situation, however in my situation – the result was a very happy employee who had succeeded in increasing his salary by over 40%. We are also running a webinar on the 16th June - on how to negotiate a pay rise and the salary you want when applying for a new job - for Warwick alumni. Check out our speaking events for more information.

Think about your value to your organisation

How valuable are you really to your company? How important is your role? How unique are your skills and how hard would it be to replace you?

It can be easy to undervalue what you have to offer. Spend a bit of time thinking about the responsibilities that you have and the tasks that you do and how reliant on you people are at the moment. Would it be easy to hire someone new and to train them to do what you do currently? How do you compare to your colleagues and peers? Often it is easy to believe that you are at the mercy of your organization, however, many of us actually have more ‘power’ and ‘control’ than we think.

Be careful not to become overly confident though. Some organisations are set up to treat people as ‘dispensable’ resources, so if you get on your ‘high and mighty’ it could be easier for them to get rid of you than keep you. This is more about identifying what you bring to your company and role given your experience and skills. Spending a bit of time getting clearer about your specific talents, strengths and interests could help you to appreciate your asset-base more and hence your full value.

Know the market rate

Find out what other people in similar roles are on. Check out job boards and benchmark your salary against the market rate. Try to get a good idea of what is ‘normal’ for your industry and for your type of role. If you were to leave where you are and go somewhere else, what are you likely to get? What will you be aiming for? What could you expect?

Get inside your boss’ head

In order to negotiate well, it can be very helpful to try and see things from your boss’ perspective. What’s in it for them? What is motivating them? What are they interested in and what do they care about?

Is it their reputation? Is it money? Do they have other concerns you haven’t noticed before that you could help them with? Do they need to build the business in a certain way and could they use your help in doing that?

It’s important to remember that the person who will be making the decisions is a fellow human being. They have needs, wants, desires, ambitions and responsibilities. Try to understand what makes them tick and hence how to push their buttons in a positive way.

If they can see that you can be helpful to them and that by giving you what you want, they will get what they want – you have a win-win.

Take your time to think

In today’s world it is easy to be impatient and to react very quickly to information we are given. In a negotiation, taking your time to think, to process information and to react accordingly can be crucial. If you are prone to responding with your initial reactions straight away, try and stop yourself from doing this.

If you are asked for an answer there and then, hold you ground. Say that you would like to think about it and that you’ll get back to them. Being put on the spot and placed under pressure to respond and make rushed decisions can result in you losing out so stay in control of the situation and make them wait. Respond when you are ready rather than caving under pressure.

Role-play or prepare for different scenarios

If this salary negotiation is important to you – you deserve the time to think about it thoroughly. You also need to be prepared for various scenarios that may occur. What will do you do if they offer you X? or Y? What will you do if they don’t offer you anything? What if they ask you about this or that?

Make sure you have at least played out the scenarios and outcomes that you can think of in your head. Think about how you might want to respond.

Know your boundaries

Think about what your boundaries are. What will work ok for you? What will be the best option for you? What are you willing to accept or not accept?

By having clear boundaries in your head, you have something to work with and you will know what in reality is going to work for you or not. Knowing what is acceptable and not can be extremely powerful. It can also result in easier decision-making because it is clear what you are after and also what would make you feel de-valued and ultimately unhappy.

Think creatively about what is useful for you

Salary can be in the form of a cheque in your bank account each month, however, that does not have to be the end of it. It can often be useful to think more creatively about the options and opportunities available to you. There are many ways that you can be remunerated and rewarded for your efforts. Thinking about this and being flexible about it will also help your employer to accommodate more of what you want. It may also end up being better for everyone in the long-run.

What about expenses – travel, equipment, software? What can be done to help you with these?
What about your health – do you care about that? Do you go to the gym, have medical bills to worry about?
Do you want to have a piece of the pie? What about equity or options?
Go for a non-rounded number

Usually in most salary negotiation books I’ve read, one will be advised not to let on what salary you want. If possible it tends to be considered optimal if you are the one to tease out what might be possible and offered to you rather than you setting an amount in stone.

However, in some cases this isn’t possible. You may simply be asked to give a figure and that’s that! So how do you come up with a figure? Well knowing what you want, what you are willing to accept or not, knowing what the market rate is, what your value is – all comes in to it. Then there’s the point where you need to pick a number to settle on. At this point – the person we worked with decided on a rounded number. They said – “that’s what I’d like to ask for and then if they take me down, I’ll be happy with X amount or Y amount minimum”. Ok, so that all seemed logical. There were certain boundaries set and an assumption that he would be negotiated down was accounted for. However, in going for a rounded number it occurred to me that surely that makes it very easy to shave off at least £5k or so – simply to get to another neat number. My suggestion here was to settle on a non-rounded, non-neat number i.e. something that feels and is a bit more calculated. Basically that means avoid the 5s and 0s.

As mentioned at the start, these tips and tricks may not work for you. They are just some suggestions and ideas that worked for us in the particular situation that we worked on.

If you’d like more help with this feel free to contact one of our guides by filling in our ‘free consultation’ form.

Author: Nisa Chitakasem, co-founder of Career Consultancy, Position Ignition Ltd

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Tuesday, June 7, 2011

New Golden Parachute Compensation Disclosure and Shareholder Advisory Vote Requirements

Client Alert.
1 © 2011 Morrison & Foerster LLP | | Attorney Advertising
June 3, 2011

New Golden Parachute Compensation Disclosure and Shareholder Advisory Vote Requirements

By Michael G. O’Bryan, David M. Lynn, and Scott G. Hodgdon
The Securities and Exchange Commission’s (the “SEC”) new disclosure and advisory vote requirements for compensation based on or relating to merger and similar transactions, often referred to as golden parachute arrangements, became effective for proxy statements and other acquisition related filings initially filed on or after April 25, 2011. The SEC adopted the rules to implement Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).1 Now that the new golden parachute compensation requirements are effective, we wanted to offer some considerations for compliance with the new requirements as well as provide discussion of some practical issues that may arise in preparing the new disclosure.
THE NEW DISCLOSURE AND VOTING REQUIREMENTS The SEC adopted new Rule 14a-21(c), which provides that if a solicitation is made by the issuer for a meeting of shareholders at which the shareholders are asked to approve an acquisition, merger, consolidation, or proposed sale or other disposition of all or substantially all assets of the issuer, then the issuer must provide a separate shareholder vote to approve any agreements or understandings disclosed pursuant to Item 402(t) of Regulation S-K. However, as described below, if such agreements or understandings have been subject to a shareholder advisory vote under Rule 14a-21(a) (the “Say-on-Pay” vote), then a separate shareholder vote is not required.
New Item 402(t) of Regulation S-K requires disclosure of named executive officers’ golden parachute arrangements in a new Golden Parachute Compensation Table, together with accompanying footnotes and narrative disclosure. The table requires quantification of cash severance payments, the value of equity awards that are accelerated or cashed out, pension and nonqualified deferred compensation enhancements, perquisites, and other personal benefits; and tax reimbursements. The table requires quantification with respect to any type of compensation, whether present, deferred, or contingent, that is based on or relates to a merger or similar transaction.
In addition to merger proxies on Schedule 14A where a shareholder advisory vote on golden parachutes will also typically be required, the new golden parachute compensation disclosure is also required in other forms and schedules. These include certain information statements on Schedule 14C, registration statements on Forms S-4 and F-4, and Schedules 13E-3 and 14D-9 in connection with going-private and tender offer transactions. As such, the new golden parachute disclosure will be required not only in connection with the approval of merger and similar transactions, but also in information statements relating to mergers and similar transactions, proxy or consent solicitations that do not contain merger proposals but require disclosure of information under Item 14 of Schedule 14A pursuant to Note A of Schedule 14A, registration statements relating to mergers and similar transactions, going-private transactions on Schedule 13E-3 and third-party tender offer solicitation/recommendation statements on Schedule 14D-9.
1 Our January 31, 2011 news bulletin describing the Say-on-Pay and golden parachute rules is available at
Client Alert.
2 © 2011 Morrison & Foerster LLP | | Attorney Advertising
SAY-ON-PAY VOTE – AN EXCEPTION TO THE SAY-ON-GOLDEN PARACHUTE VOTING REQUIREMENT Issuers that wish to take advantage of the possibility to exclude a shareholder advisory vote on golden parachute compensation in connection with a future vote on a merger or similar transaction must voluntarily include the Item 402(t) tabular and narrative disclosures in annual meeting proxy statements at which a Say-on-Pay vote will be held. If there are changes to the arrangements after the date of the annual meeting or if new arrangements are entered into that were not subject to a prior Say-on-Pay vote, then a separate shareholder advisory vote on the golden parachute compensation will still be required. In that case, the vote is required only with respect to the amended golden parachute payment arrangements. Other than changes that result only in a reduction in the amount of golden parachute compensation or that arise because of a change in the stock price, any other change to the golden parachute arrangements after the Say-on-Pay vote will trigger the requirement for a new vote.
Based on the filings thus far this proxy season, it is unlikely that companies will often use the Say-on-Pay vote exception.2 In the months since the requirement for a mandatory Say-on-Pay vote became effective, only a handful of issuers have voluntarily included the Item 402(t) golden parachute compensation disclosures in their annual meeting proxy statements. Companies may be concerned with how these disclosures could impact the required Say-on-Pay vote, including whether such disclosures would be viewed favorably by proxy advisory services if the annual meeting proxies include the additional golden parachute compensation disclosures. In addition, companies may be concerned that providing such disclosures voluntarily signals the market that the company could be engaged in a significant transaction in the coming months.
Regardless of the frequency with which the exception is used by other companies, companies should consider voluntarily including the disclosure only if they foresee that including the disclosure will provide a longer term benefit to the company in the future, such as if there is a likely forthcoming transaction where the potential signaling effect is not a concern. In addition, companies with relatively simple golden parachute arrangements may find it beneficial to adhere to the Item 402(t) requirement as they would not be much more onerous to comply with these than the annual meeting proxy disclosures on change of control and termination arrangements required by Item 402(j) of Regulation S-K. In most cases, however, we would not recommend relying on the exception as it will likely provide little benefit to most issuers.
HOW ARE COMPANIES APPROACHING THE DISCLOSURE AND VOTE REQUIREMENTS? The new disclosure and vote requirements apply only to initial filings made on or after April 25, 2011. Even though it has been a relatively short period of time since the effectiveness of the new rules, there have been a couple of trends in the disclosures thus far.
For the most part, companies are adhering closely to the requirements of the new Golden Parachute Compensation Table in merger proxies, registration statements and other transactional forms. Because the rule itself explicitly describes the table and the accompanying narrative disclosure, much of the variation in the disclosure to date relates to the complexity of the arrangements, often manifested through the length and number of footnotes accompanying the Golden Parachute Compensation Table. In some cases, the new disclosure results in an additional page of disclosure in the applicable form or schedule, while in other cases the table and footnotes extend over several pages because of the complexity of various scenarios and triggering events.
2 Note that the exception does not provide for a separate advisory vote on golden parachutes in advance of a transaction. In order to take advantage of the exception, a company must include the new golden parachute compensation disclosure in an annual meeting proxy statement when the company is conducting a “Say-on-Pay” vote.
Client Alert.
In addition, many companies that have filed merger proxies or registration statements on Form S-4 that also require a shareholder advisory vote on golden parachutes have found it helpful to describe the relationship of the golden parachute advisory vote to other votes on the transaction, including approval of the deal itself. While companies are required to disclose that the golden parachute vote is non-binding, many have also disclosed whether or not the golden parachute vote is a condition of the transaction and whether the results of the advisory vote on golden parachutes would affect the consummation of the merger. As expected, generally approval of the golden parachute arrangements is not a condition of the transaction, and a lack of approval of the golden parachutes will not affect consummation of the transaction.
Many companies have also included disclosure regarding the effect of the golden parachute advisory vote on the status of the golden parachute payments. This type of disclosure typically notes that the golden parachute arrangements are contractual obligations of the company, and that even though the company values the input of shareholders as to whether such arrangements are appropriate, the company would nonetheless be required contractually to make, and would make, such payments even if the arrangements are not approved by the shareholders in the advisory vote.
We recommend that companies consider some of these additional clarifying disclosures so as to provide better context for the shareholders when they are considering their advisory vote on the golden parachute arrangements.
PRACTICAL ISSUES We also wanted to make note of some practical and interpretive issues to keep in mind while preparing a schedule or form with the new golden parachute compensation requirements.
Advance Planning Companies should consider the impact of the requirements before they sit down to draft the disclosures. In other words, it may be helpful for companies to move discussions of golden parachute arrangements and the required disclosure to an early point in the process so that the drafting of potentially complex disclosure is not left until the last minute. It may also be helpful to discuss the optics of the arrangements and, in transactions where an advisory vote is required, how shareholders are likely to react to the disclosure. This will help prevent surprises down the road.
Location of Disclosure Even though the various forms and schedules have been amended to require the disclosure of golden parachute arrangements, companies still have some leeway as to how the table will be presented and where in the document it will be included. For example, even if the golden parachute disclosure is required under a specific item of the form or schedule, it may make sense to include the table and accompanying narrative disclosure elsewhere in the document if there is, for example, additional executive compensation disclosure. Companies that choose to do this should include appropriate cross-references so that the disclosure is easy to locate.
In the examples we have seen thus far, some companies conducting a required shareholder advisory vote on golden parachute arrangements include the discussion of the vote with the Golden Parachute Compensation Table, while others discuss all the shareholder votes together and provide a reference to another part of the document where the table is located. Neither way is necessarily better, but companies should take care to make it clear what disclosure is covered by the shareholder advisory vote.
Disclosure of Voting Results While it is too early to gauge how issuers will present the results of the shareholder advisory vote on golden parachutes, we foresee that such results will simply be presented in an Item 5.07 Form 8-K together with the results of other shareholder votes which occur at the meeting. Companies may wish to consider some additional disclosure in the event
3 © 2011 Morrison & Foerster LLP | | Attorney Advertising
4 © 2011 Morrison & Foerster LLP | | Attorney Advertising
Client Alert.
they receive a high number of disapproval votes or more disapproval votes than approval votes. In most cases, though, the best course of action may be to simply present the results of the vote no matter the result, as there is no requirement to explain or comment upon the results. The acquiring company may also consider including disclosure in its future filings that would address the issue and discuss any changes to the compensation arrangements since the completion of the transaction.
Michael G. O’Bryan (415) 268-6352
David M. Lynn (202) 887-1563
Scott G. Hodgdon (703) 760-7753
About Morrison & Foerster:
We are Morrison & Foerster—a global firm of exceptional credentials in many areas. Our clients include some of the largest financial institutions, investment banks, Fortune 100, technology and life science companies. We’ve been included on The American Lawyer’s A-List for seven straight years, and Fortune named us one of the “100 Best Companies to Work For.” Our lawyers are committed to achieving innovative and business-minded results for our clients, while preserving the differences that make us stronger. This is MoFo. Visit us at
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Monday, June 6, 2011

At-Large Series: LinkedIn’s Surge Sets Stage for More Internet I.P.O.’s

LinkedIn’s Surge Sets Stage for More Internet I.P.O.’s

Mark Lennihan/Associated Press
Reid Hoffman, LinkedIn’s founder, on the floor of the New York Stock Exchange as his company made its trading debut.
It’s not 1999, but the big Internet I.P.O. is back.

Shares of LinkedIn, the professional social network, more than doubled on their first day of trading, a surprising debut that both echoed the giddy exuberance of the last tech boom and heralded the coming of several multibillion-dollar Internet companies, like Facebook, that are expected to go public in the next 12 months.

The initial public offering, the largest by a United States Internet company since Google’s offering in 2004, was a major test of investor demand for the new wave of fast-growing social Web companies. Valuations for start-ups like Groupon, Facebook, Twitter and Zynga have been surging in private secondary markets in recent months. Thursday’s market action was an indication that investors’ appetite for these businesses had not waned despite questions of whether sky-high valuations were justified.

Linkedin’s shares opened on the New York Stock Exchange at $83 — up from its I.P.O. price of $45 — and rose as high as $122.70 before paring their gains. The shares closed at $94.25, giving the company a market value of roughly $9 billion — more than four times the value of an early Internet king, AOL.

But this Internet boom is different in many ways from the last one.

DealBook: Goldman Comes Up Short in LinkedIn I.P.O.
The companies going public have more than just “eyeballs” of Web users; they have businesses that report earnings and revenue. LinkedIn, for example, which makes money from advertising, subscriptions and recruitment services, made $15.4 million last year on $243.1 million in revenue.

And unlike the late 1990s, there is no flood of new companies coming to market. Much of the enthusiasm for LinkedIn can be attributed to the small number of shares sold and a pent-up demand by investors who have had to wait out the financial crisis to put money in a sizable American Internet start-up. In its offering, LinkedIn sold 7.84 million shares, less than 10 percent of the company, with the option to sell an additional 1.1 million. Roughly 95 percent of the investors who wanted an allocation did not get their full allotment, said a person close to the offering who was not authorized to speak publicly about it.

“Today, there are a limited number of players in social media,” Lou Kerner, a Wedbush Securities analyst said. “There’s incredible investor demand for everything social because of its potential growth.”

Still, Thursday’s rally was particularly stunning because few expected LinkedIn to be a blockbuster I.P.O. The last United States company to gain more than 100 percent on its first day of trading was Nymex, the commodities market operator, in 2006, according to data from Renaissance Capital, an I.P.O. advisory firm.

Before this month, the company had attracted modest attention compared with its high-flying peers Facebook and Groupon, which have wowed investors with billion-dollar funding rounds and surging valuations.

In the first week of May, LinkedIn set the target range for its offering at $32 to $35 a share, which valued the company at about $3 billion. Then the company raised the bar 30 percent on Tuesday, to a range of $42 to $45 a share. The market rally on Thursday is now causing investors and entrepreneurs to scramble and adjust their calculations upward.

“If LinkedIn is worth $10 billion, you got to think, what is Facebook worth?” asked Peter Falvey, a managing director at Morgan Keegan.

“Not that long ago, LinkedIn was seen as the fifth major social Web company — behind everyone else.”

Facebook, which is widely expected to go public next year, has soared on the secondary markets, with shares trading at an implied valuation as high as $80 billion in recent months. The social buying site Groupon, which raised nearly $1 billion from investors in January, is said to be talking to bankers about an I.P.O. with a valuation of possibly more than $20 billion.

By far outpacing expectations on Thursday, LinkedIn is seen as positive harbinger for these businesses and smaller start-ups with I.P.O. aspirations.

Tony Zingale, the chief executive of Jive Software, a private company that provides social business software, said that he was tracking LinkedIn’s performance to gauge the markets.

“We’re excited,” he said, “It appears to be going well, there seems to be tremendous pent-up demand, for finally, a social media offering.”

Indeed, the euphoria around LinkedIn appeared to be spilling back into the secondary markets — exchanges where private shares are traded — bolstering demand for other start-ups. SecondMarket, one of the largest of such exchanges, said activity on its Web site and the number of sign-ups doubled on Thursday, compared with an average day.

Yet as more investors clamor for the shares of these popular social media companies, there is also a growing concern that valuations have become unhinged from fundamentals.

With a valuation of $9 billion, LinkedIn is now trading at 584 times last year’s earnings and 37 times last year’s revenue. The site, which has about 100 million members, offers a “freemium” business model: users can create free profiles or they can pay a subscription fee for a premium account with special features. LinkedIn also offers hiring solutions for businesses and recruiters. Although the company is still growing at a rapid clip, it is facing stiff competition from other online sites, like the job listing services Monster and CareerBuilder.

“The quality of their information is very good,” said Cem Ozkaynak, a co-founder of the financial research firm Trefis. But, he added, “LinkedIn will have to maintain the significant fees it charges to corporate and business customers while growing its corporate and business customer base significantly from a few thousand customers today to tens of thousands over the next few years.”

There’s also the concern that a strong valuation in the public markets — while nice for LinkedIn shareholders — could ultimately be an albatross for an eight-year-old company still struggling with profitability.

It was profitable last year, but it posted losses in 2008 and 2009. Now that its financial statements are being publicly disclosed, LinkedIn may come under pressure to meet the expectations of fickle shareholders who are looking for numbers that justify a $9 billion valuation.

That could be a significant challenge for LinkedIn, which has repeatedly expressed its commitment to investing in its platform, at the expense of short-term profits. A rich market capitalization may also make it harder for the company to retain and recruit talented engineers — a precious resource in a booming Silicon Valley.

“They will now have to make numbers, every 90 days, forever,” said Mr. Falvey of Morgan Keegan. “And, if you achieve huge one-day gains, existing employees will make so much money that they may not have to work again, meanwhile, you’ll have to prove to prospective employees that the stock is still attractive.”

LinkedIn’s executives, who were at the New York Stock Exchange to witness the opening of the stock, were exuberant over the market debut. Still, the chief executive, Jeff Weiner, sought to temper the significance of the gains.

“It’s an exciting day,” he said in an interview. “But we’re not focused on where the stock is. These short-term fluctuations are not going to be meaningful in the long term.”

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At-Large Series: A Force Behind Lady Gaga Inc.

A Force Behind Lady Gaga Inc.

Dominic Chan/
Troy Carter, Lady Gaga’s manager, helped start Backplane, a way to connect fans, whether of music or sports teams.
Soon after Apple started its music-centric social network Ping last year, Steven P. Jobs reached out to Lady Gaga and her business manager, Troy Carter, for feedback.

At the company’s headquarters in Cupertino, Calif., Lady Gaga peppered Mr. Jobs, Apple’s chief executive, with questions about Ping’s design and how it would work with other social networks. The pop star and Mr. Carter voiced concerns over the lack of integration with Facebook, but they left respecting Mr. Jobs’s overall vision.

The meeting also gave Mr. Carter, a new technophile, an idea. He called his friend Matthew Michelsen, a well-connected technology investor and entrepreneur, to find a platform for entertainers that could help them manage their fan base across all major social networks.

“I said why try to find a platform, let’s try to build one,” Mr. Michelsen said.

Despite Lady Gaga’s demanding world tour schedule that fall, Mr. Carter and Mr. Michelsen quietly founded a start-up, the Backplane, with a team of seven. The company, which has not yet been unveiled, is a platform meant to power online communities around specific interests, like musicians and sports teams, and to integrate feeds from Facebook, Twitter and other sites.

“Backplane will provide a platform and tools for communities to socialize and communicate on a more focused level,” Mr. Carter said, sounding less like a pop star’s manager and more like an entrepreneur delivering the typical elevator pitch. “We needed a more concentrated base.”

While Lady Gaga herself — née Stefani Joanne Germanotta — is the artist and creative mind behind Lady Gaga Inc., her lesser-known manager, Mr. Carter, is leading the enterprise’s digital strategy. Unlike other managers who focus on a handful of big platforms like YouTube, Mr. Carter is trying to tap into a broad range of online tools to keep the Gaga machine in overdrive.

Backplane — a blend of music, celebrity and technology — was a natural evolution, says Mr. Carter, who has worked with Lady Gaga for more than four years. As traditional sales have dwindled, the Internet has become increasingly important in music management.

“There was a time when radio stations wouldn’t play Gaga’s music, because it was considered dance,” Mr. Carter said. “Outside of live performances, the Internet became our primary tool to help people discover her music.”

Mr. Carter represents an emerging group of Hollywood managers, actors, musicians and other industry players who are spending more time in Silicon Valley, as technology upends the way people consume content.

The worlds of technology and entertainment have often clashed, tested by products like the music-sharing service Napster, through which some users shared files illegally. Some critics in Silicon Valley are still skeptical of Hollywood people, whom they view as carpetbaggers overestimating their worth.

“Sure these guys can be helpful, but can Lady Gaga make a company? No,” said Jeff Clavier, a venture capitalist.

To Mr. Carter, the two industries are symbiotic. As he pushes to extend the Lady Gaga brand and his own influence in Silicon Valley, he has had many meetings with executives from Zynga and Larry Page, the chief of Google, whom Lady Gaga affectionately calls Larry Google. He is also an investor in several promising start-ups, including, Tiny Chat and Lumier, a company backed by Facebook’s first outside investor, Peter Thiel.

Mr. Carter’s own venture, Backplane, is attracting capital from prominent backers. The company has raised more than $1 million from a group of investors led by Tomorrow Ventures, the investment firm of Google’s chairman, Eric E. Schmidt. Lady Gaga, who has acted as an informal consultant, is also a major shareholder, with a 20 percent stake.

“I’ll never forget when I first met Troy” in 2009, Mr. Michelsen said, who at the time was helping the rapper 50 Cent with his online initiatives. After talking for nearly three hours about the intersection of music and technology, Mr. Carter ended the conversation by saying, “I’m going to get you out of music and you’re going to get me into the tech business.”

Casually dressed in dark jeans, a loose-fitting cream-colored cardigan and thick-framed glasses, Mr. Carter, 38, stands in stark contrast to his client, a paparazzi magnet in her pyrotechnic bras and towering Alexander McQueen heels. Mr. Carter is more comfortable out of the limelight, quietly brokering deals for his larger-than-life clients.

He has worked for Sean Combs, the late Notorious B.I.G. and Will Smith, whom he met in his hometown, West Philadelphia, in the late 1980s. Mr. Carter had come through a scrappy childhood, often subsisting, he said, on government-issued cheese. As a teenager, he lugged crates of records for D.J. Jazzy Jeff and Mr. Smith, then known as the Fresh Prince.

Today, as the chief executive of his own management company, the Coalition Media Group, he represents the firm’s talent, including the YouTube sensation Greyson Chance and the Bollywood actress Priyanka Chopra. But a great deal of his time is spent with his biggest client, Lady Gaga.

Her star power, combined with Mr. Carter’s aggressive deal-making, have made Lady Gaga a force on the Web. In May, she became the first Twitter user to reach 10 million followers, edging out the teenage phenomenon Justin Bieber and President Obama. Her Facebook page has 36 million fans. And in the last few weeks she has begun promotional deals with Google, Zynga and Gilt.

“Troy and Gaga are doing things with communications and fan relationships that we haven’t really seen before,” said Gary Briggs, a vice president at Google, who worked with Lady Gaga’s team on her recent TV commercial for Chrome, Google’s web browser.

Amazon sold digital copies of Lady Gaga’s latest album, “Born This Way,” for 99 cents on May 23 in a heavily publicized move to promote its music service. Her fan base of so-called little monsters crashed Amazon’s servers on the first day of sales. The promotion, paid for by the retailer, helped her sell 1.1 million albums in the United States in its debut week, according to figures released by Nielsen SoundScan, the most for any artist since 2005.

Unlike most venture capitalists, Mr. Carter tends to invest in platforms that are complementary to entertainers. Backplane, along with, a personalized ad start-up, and Lumier, a design-oriented company, will prominently feature Lady Gaga for their public introductions.

Because of Lady Gaga’s reach, she is a valuable incubator to promote new concepts or products. Zynga recently began GagaVille, a special promotion that allowed FarmVille users to unlock her new songs and special virtual items like unicorns and crystals. Bing Gordon, a director at Zynga, called it a logical combination, saying “it’s all about entertainment.” He recently added Gaga crystals to his virtual farm.

The deal developed like many in Lady Gaga’s empire. Mr. Carter and his team negotiated the structure of the arrangement, hammering out a partnership in 90 days. Lady Gaga worked on the creative end, pulling visual components from her music videos and tours to bring a sense of “authenticity” to the design.

“Technology has long been the driver of growth in the music business from the invention of lacquers, eight-track players, vinyl, cassettes and CDs,” Mr. Carter said. “In order to continue the growth we have to go back to embracing technology and the way that people choose to consume music.”

Friday, June 3, 2011




On May 25, 2011, the Securities and
Exchange Commission (SEC) adopted final
rules implementing Section 922 of the Dodd-
Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act), which adds
Section 21F to the Securities Exchange Act of
1934. The new rules provide bounties and
protections for whistleblowers reporting
violations of securities laws to the SEC.1 The
rules will pose numerous difficult challenges
for companies trying to implement effective
compliance programs and internal reporting
systems. We have highlighted some of the
key provisions of the final rules below.
Whistleblower Provision Basics
Under the final rules, the SEC will pay an
award to a whistleblower who voluntarily
reports to the SEC original information that
leads to a successful enforcement action
in which the SEC’s monetary sanctions
exceed $1 million. The SEC will award
whistleblowers 10 to 30 percent of the
monetary sanctions. The SEC requires original
information to be based on independent
knowledge or analysis that is not already
available or known to the SEC. In addition, a
whistleblower is protected under the rules
from employment retaliation if the
whistleblower reasonably believes that the
information reported to the SEC relates to a
“possible securities law violation.” The SEC
stated that it would be unlawful for
companies to use confidentiality agreements
as a way to prevent whistleblowers from
reporting information to the SEC.
Internal Reporting Not Required
During the comments process, the most
actively debated aspect of the proposed rules
was that they did not require whistleblowers
to report concerns through a company’s
internal compliance program before reporting
to the SEC. Many business and legal
commentators argued that without a
requirement that employees first report
potential violations internally, employees
would be discouraged from utilizing the
corporate compliance programs that
companies have spent significant expense
and effort creating, particularly following the
enactment of the Sarbanes-Oxley Act of 2002.
The SEC declined to require that
whistleblowers report potential violations
through a company’s internal compliance
program in order to be eligible for a bounty.
The final rules do, however, include
provisions that are intended to encourage
whistleblowers to utilize internal compliance
programs, including making internal reporting
a factor for the SEC to consider when
determining the amount of an award2;
decreasing awards for whistleblowers who
interfere with internal compliance programs3;
providing rewards for information reported to
the SEC by a company if the source of the
information was the whistleblower4; and
lengthening the period of time—from 90 to
120 days—during which a whistleblower can
wait to approach the SEC after reporting
internally and still receive a bounty.5
While these changes improve upon the
proposed rules, they likely still create
incentives to report directly to the SEC and
bypass internal reporting. For example, a
whistleblower seeking to maximize his or her
bounty may believe that reporting internally
first will give a company the opportunity to
investigate, remediate, and self-report to the
SEC, thus earning the company cooperation
credit—which ordinarily means that the SEC
is less likely to impose a substantial penalty
on the company. Such a credit could minimize
or perhaps even eliminate any monetary
sanction—and with it, any potential bounty.
Ineligible Whistleblowers
As with the proposed rules, the final rules
also provide that certain people generally will
not be considered for bounties because of the
nature of their positions. Thus, attorneys
(including in-house counsel) who use
information obtained in the course of client
engagements may not make whistleblower
claims for themselves. Similarly, compliance
and internal audit personnel and officers and
directors who learn of allegations of
misconduct from another person (such as an
employee) or through the company’s internal
reporting mechanisms are not eligible to
receive a bounty.
The final rules provide exceptions that likely
will create uncertainty as to whether
compliance or internal audit personnel can
collect bounties, however. Such personnel
may collect bounties if they “reasonably

SEC Adopts Final Rules . . .
Continued from page 1...
believe” that reporting information to the SEC “is necessary to prevent the relevant entity
from engaging in conduct that is likely to cause substantial injury to the financial interest
or property of the entity or investors,” or that the company “is engaging in conduct that
will impede an investigation of the misconduct.”6
The summary above highlights just a few of the key provisions of the SEC’s release on the
final whistleblower rules, which is comprised of over 300 pages. The new whistleblower
rules also underscore the importance of companies examining their internal reporting
policies and procedures to determine whether they can be enhanced. Indeed, developing
and promoting robust internal reporting policies and procedures is now more important
than ever.
Finally, although the final rules have yet to take effect, the SEC has told Congress that it
already has seen an increase in the quality of tips received since the passage of the
Dodd-Frank Act.7 The full effects of the new whistleblower rules remain to be seen, but
companies should brace themselves for an increase in claims and the corresponding
litigation that is sure to follow.
For any questions or for more information on these or any related matters, please contact
a member of Wilson Sonsini Goodrich & Rosati’s corporate securities or securities
litigation practices.
6 See final rules, 17 C.F.R. § 240.21F-4(b)(4)(v), supra note 1, at 249.
7 SEC Chairman Mary L. Schapiro, Opening Statement at SEC Open Meeting: Item 2 – Whistleblower Program
(May 24, 2011), available at
This WSGR Alert was sent to our clients and interested
parties via email on May 31, 2011. To receive future
WSGR Alerts and newsletters via email, please contact
Marketing at
and ask to be added to our mailing list.
This communication is provided for your information only
and is not intended to constitute professional advice as to
any particular situation. We would be pleased to provide
you with specific advice about particular situations,
if desired. Do not hesitate to contact us.
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© 2011 Wilson Sonsini Goodrich & Rosati,
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1 The final rules are available at
2 See final rules, 17 C.F.R. § 240.21F-6(a)(4)(2)(ii), supra note 1, at 255, 257-58.
3 See final rules, 17 C.F.R. § 240.21F-6(b)(3), supra note 1, at 259-60.
4 See final rules, 17 C.F.R. § 240.21F-4(b)(5), supra note 1, at 250-51.
5 See final rules, 17 C.F.R. § 240.21F-4(b)(7), supra note 1, at 251-52. Continued on page 2...
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