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
BY EVELYN M. RUSLI

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.

JUNE 5, 2011, 9:29 PM VENTURE CAPITAL
A Force Behind Lady Gaga Inc.
BY EVELYN M. RUSLI

Dominic Chan/WENN.com
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 Bre.ad, 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 Bre.ad, 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.”

SEC ADOPTS FINAL RULES REGARDING WHISTLEBLOWERS

WSGR ALERT MAY 2011

SEC ADOPTS FINAL RULES REGARDING WHISTLEBLOWERS

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
Conclusion
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 http://www.sec.gov/news/speech/2011/spch052511mls-item2.htm.
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 wsgr_resource@wsgr.com
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.
650 Page Mill Road
Palo Alto, CA 94304-1050
Tel: (650) 493-9300 Fax: (650) 493-6811
email: wsgr_resource@wsgr.com
www.wsgr.com
© 2011 Wilson Sonsini Goodrich & Rosati,
Professional Corporation

Austin hong kong new York Palo Alto San Diego San Francisco Seattle Shanghai wAshington, D.c.

1 The final rules are available at http://www.sec.gov/rules/final/2011/34-64545.pdf

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...

Austin hong kong new York pAlo Alto sAn Diego sAn FrAncisco seAttle shAnghAi wAshington, D.c.

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Smartphone App Is a Good Reminder to Ensure FLSA Record Keeping in Order

Source: Daily Labor Report: News Archive > 2011 > May > 05/31/2011 > BNA Insights > DOL's

Smartphone App Is a Good Reminder to Ensure FLSA Record Keeping in Order By James M. Coleman

104 DLR I-1
WAGE & HOUR

The Labor Department's new smartphone application that employees can use to
track their hours worked, breaks, and overtime—and eventually their tip income,
commissions, bonuses, and paid time off—should serve as a warning for
employers to thoroughly review all recordkeeping obligations under the Fair Labor
Standards Act, management attorney James M. Coleman warns in this BNA
Insights article.

Until it becomes more clear how differences between the employer's set of
timekeeping records and the employee's app-based records will be handled by
courts and by DOL's Wage and Hour Division, Coleman, with Constangy Brooks &
Smith in Fairfax, Va., advises employers to take the time to make sure their wage
and hour recordkeeping is in order.

DOL's Smartphone App Is a Good Reminder to Ensure FLSA Recordkeeping in Order
By James M. Coleman
James M. Coleman is a managing partner with the national labor and employment law firm of
Constangy, Brooks & Smith LLP, the co-chair of the firm's Wage & Hour Practice Group, and heads the firm's office in Fairfax, Va. Mr. Coleman can be reached at jcoleman@constangy.com.

The next time you see your employees entering data on an iPhone, be thankful if they're only texting
their friends.
Instead, your employees may be creating their own records of the hours that they will claim they
worked. On May 9, 2011, DOL's Wage and Hour Division (WHD) announced its first “smartphone
application” (89 DLR A-2, 5/9/11). Although the current version works only with the iPhone and the
iPod Touch, DOL promises updated versions that will work on Blackberry and Android-based
smartphones, as well as updated functionality that will allow for the tracking of more extensive data,
including tip income, commissions, bonuses, deductions from pay, holiday pay, shift differentials, and
paid time off.
For now, the free app provides users with an electronic timesheet, which DOL says will help employees
to independently track the hours they work. Once the employee's hourly wage is entered, the app
automatically calculates the gross wages that are due based on the data entered. It can also track
breaks and overtime. The app is currently available in both English and Spanish.
The DOL is touting its app as a significant technological advance because “instead of relying on their
employers' records, workers now can keep their own records. This information could prove invaluable
during a WHD investigation when an employer has failed to maintain accurate employment records.”

DOL is not saying whether it will consider the employer's records to be inaccurate merely because the
employee's own records may differ.
Although it has received a lot of attention, many believe that the timekeeping app is more of a
gimmick and an effort at public relations, than anything else. Employees have always been free to
create their own records of hours worked, whether using pencil and paper, a calendar, an oldfashioned
Palm Pilot, or stone tablets, for that matter. In the end, the app does not allow an employee
to do anything that she couldn't have done before, albeit by less technologically advanced means.
Also, one wonders how many workers who might use an app like this can afford to own an iPhone or
iPod Touch, or the associated monthly data charges.
That said, the app has certain advantages, including the automatic calculation of gross pay, and the
ability to e-mail the data–perhaps to the employee's lawyer or the WHD. And it certainly provides
employers with an incentive to make sure that their wage and hour recordkeeping is in order.

Recordkeeping Obligations Under FLSA
The federal statute that is implicated by the app is the Fair Labor Standards Act , as amended, 29
U.S.C. § 201, et seq. (FLSA). The FLSA requires employers to maintain accurate records of hours
worked by nonexempt employees, and failure to maintain records is a violation of the FLSA in itself,
even if the employer complies with its minimum wage and overtime obligations.
But frequently, the failure to maintain adequate records is also used against the employer to prove
that it committed substantive violations of the FLSA's minimum wage or overtime requirements.
Where the plaintiffs are “exempt” employees who contend that they should be treated as nonexempt,
the employer will usually have no records of hours worked because exempt employees are excluded
from that portion of the FLSA's recordkeeping requirements that mandate records of hours worked.
Courts use a burden-shifting analysis in order to establish the hours worked for which minimum wage
or overtime compensation is due. The plaintiffs have the initial burden of proof to establish that they
performed work for which they were not properly compensated under the FLSA. When the employer
has maintained no records of hours worked—perhaps because it had been treating the plaintiffs as
exempt, or because the records that do exist are inaccurate or unreliable—the plaintiffs can easily
satisfy their initial burden of proof. All they have to do is produce sufficient evidence to show the
amount and extent of that uncompensated work as a matter of just and reasonable inference. Once
this inference is established to the satisfaction of the court, the burden is then placed on the employer
to come forward with evidence of the precise amount of work performed or with evidence that negates
the reasonableness of the inference established by the plaintiffs.
FLSA Cases Based on App
It will be interesting to see what the courts will do with employee time records that were maintained
via the new app. Presumably, “app records” will be given the same weight as any other employee
record of hours worked. However, it will take some time before “FLSApp cases” make their way
through the court system.
We expect to see more quickly how WHD will respond to FLSA complaints that are supported by
records created via the new app. Employers may be hearing soon from WHD investigators with
questions about why the employer's time records differ from employee records created via the new
app. Presumably, some variation between the competing sets of records is to be expected, but if the
differences are significant, it will be interesting to see which set of records DOL will be more likely to
accept as an accurate reflection of hours worked. Stay tuned…
Contact us at http://www.bna.com/contact/index.html or call 1-800-372-1033
It will be interesting to see what the courts will do with employee time records that were maintained via the new app.

ISSN 1522-5968
Copyright © 2011, The Bureau of National Affairs, Inc.. Reproduction or redistribution, in whole or in part, and in any form, without express written permission, is prohibited except as permitted by the BNA Copyright Policy. http://www.bna.com/corp/index.html#V



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Are You About to Negotiate Executive Compensation? Follow These Tips

Are You About to Negotiate Executive Compensation? Follow These Tips

by N Nayab (74,520 pts ), Edited by Jean Scheid
Published on May 5, 2011

The increased competitive pressures and traditionally high executive compensation levels place executive compensation in the spotlight, with both companies and executives under increasing pressure to justify their compensation packages.
Quantify

How to Negotiate Executive CompensationCompetitive pressures have forced most organizations to take a quantitative approach to their hiring decisions. HR managers looking at how to negotiate executive compensation now go by the value the new person can provide to the company as the guiding force, and negotiate compensation on such a basis.

The best approach for executive compensation negotiation requires incorporating figures. Instead of simply recording past activities or achievements in the resume, quantify such achievements. For instance, instead of merely stating “oversaw business process re-engineering to reduce process time by five minutes” include details such as “reducing process time by five minutes results in productivity increase by 20 percent, leading to overall savings of $20,000 for the unit.”

Assess the expected value the company gains by making the hire, based on record of accomplishment in previous positions, job profile, company’s business plan, and size of operations. For instance, point out the expected ROI of the hire against budget, revenue growth, stock value and other parameters derived from the financial statements. Negotiate a salary as a percentage of the expected value added.
Benchmark

The prevalent knowledge centric business environment raises the stature of human resources as a critical source of competitive advantage. Companies compete for talent, and would readily match if not exceed, the compensation and benefits provided by competitors to retain talent.

Benchmark on skill-sets rather than the position. The demands of flexibility have pushed the traditional concept of pay scale out of executive compensation plans, and compensation now depends more on the skills of the individual rather than the title of the position. Try to determine the worth of specific skills in the industry, assess the skills possessed, and conjure up the industry values for such skills possessed. Professional organizations and websites such as Salary.com or the Bureau of Labor Statistics, or mentors in the industry constitute good sources for such information.

Successful negotiation depends on understanding the demand for the skill-sets, the scope of the job or the nature of duties, and negotiating based on the extent to which the candidate’s skills and competencies will “fit” the requirements.
Benefits

Executive compensation includes salary, bonus, and benefits such as stock options, free accommodation, transportation, reimbursement of children’s education, extra insurance, extra vacation, memberships, financial and legal counseling, golden parachutes or lump sum payments in the event of a layoff, and others. Negotiating executive compensation requires considering the range of such benefits offered. Consider the extent and range of benefits offered, and the long term value of such benefits.

At times, the nature of negotiation changes from the overall compensation figure to the type of benefit. Select the most useful and most relevant benefit. For instance, an employee with college going children would find benefits such as company reimbursement of education expense and free company transportation, allowing him to stay near the children’s college most valuable.

Consider the tax implications of the benefits. For instance, opting for 401(k) plan would save income tax, as would stock options. Such tax savings can serve as effective means to reduce cost-to-company without employees losing out in a big way.
Understand Trends and Preferences

How to Negotiate Executive CompensationPeople looking at how to negotiate executive compensation would do well to understand underlying critical issues such as the company’s compensation framework and structure, and the prevalent market and economic trends. Understanding such trends and positioning for what the company can commit to easily makes for a good negotiation tactic.

For instance, if the company traditionally has a cash-heavy compensation structure, negotiating for greater perks may not cut much ice.

Increased labor turnover and tight economic conditions leads to tighter controls for granting perks such as company cars, club memberships, executive health plans, and some other benefits with long-term commitments and implications. Insisting on such benefits may become counter-productive.

Some companies may encourage executives to co-invest in the firm’s existing portfolio of companies, to tie the success of the company and the executive’s performance. Agreeing to the same might create a favorable impression.

Again, regulations such rules established by the SEC and Financial Accounting Standards Board (FASB) may also impact executive compensation. For instance, the FASB rule FAS123R makes it mandatory for companies to record as expenses the value of stock options granted to employees as compensation. This makes employers prefer giving deferred stock or restricted stock grants that vest after a certain period.
General Tips

Finally, the success of executive salary negotiation depends on adherence to some time tested tips:

* Prioritize demands. Focus on deal-breakers and leave minor issues to the end.
* Adopt a win-win approach. Posturing for a win-lose approach creates doubts about the candidate from the word go, or at least may lead to unrealistic expectations.

Other factors influencing executive salary negotiation include a fancy job title, accelerated salary review periods, flextime options, paid sabbaticals, growth opportunities, nature of reporting relationships, and more. The extent to which candidate values such facilities or options may have a bearing on the overall compensation figure.

Merit alone does not ensure a handsome compensation package. As the adage goes, “you get what you negotiate, not what you deserve.”
References

1. Salary.com “Executive Compensation Checklist.” http://www.salary.com/Articles/ArticleDetail.asp?part=par181. Retrieved May 02, 2011.
2. AllBusiness. “How to Negotiate an Executive Contract.” http://www.allbusiness.com/human-resources/compensation/925293-1.html. Retrieved May 02, 2011.
3. DiversityMBA. “Negotiating the Executive Compensation Package.” http://diversitymbamagazine.com/negotiating-the-executive-compensation-package. Retrieved May 02, 2011.


Read more: http://www.brighthub.com/office/career-planning/articles/116545.aspx#ixzz1OBVLEMRT


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ADA Final Regs In Effect

Virginia Workplace Law
ADA Final Regs In Effect
By: Karen Elliott. Tuesday, May 24th, 2011

Today is the day the final regulations governing the Americans with Disabilities Act, as amended (ADAA), became effective. Much has been written heralding these new regulations which provide definition to the Act’s amendments, which were effective over two years ago.
The media, including blogs, have largely focused on how the new regulations didn’t really change much, which is true. So from a media perspective, this “effective date” has largely gone unnoticed. This is an unfortunate message because this assumes that management has already been instituting the major changes demanded by the 2008 Amendments that are now “old” news. In my experience, businesses still do not understand those changes. Do you? If you can’t answer “yes” to the following questions, you still have some work to do:
1. Do you have a detailed job description noting the essential functions of each job?
2. Have you instructed and trained all of your managers to report to human resources when employees state they are not performing or underperforming due to a health situation?
3. Do you know that when you are given information by an employee that they are not performing due to a health-related reason that you are on notice that you must now engage in the interactive process to determine if a) they are disabled and b) if a reasonable accommodation is in order?
4. Did you know that the law now treats most significant health-related issues as a “disability.” In other words, employers are expected to work with their employees if they have significant health issues to determine if there is a way to keep them employed.
5. Did you know that if you engage in a good faith effort to reasonably accommodate an employee that the law forecloses the award of punitive damages?
If you need any assistance with turning your “no” into “yes,” please contact a Virginia Employment Attorney.

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