Gaming CEOs traded salary for stocks. Their ‘gamble’ is set to pay off
Two weeks ago, on December 18, 2020, I was quoted on the utility of corporate CEOs taking restricted stock units (RSUs) in lieu of cash bonuses, in an article, with the title above, published in the Las Vegas Review-Journal.
The newspaper that published this article, Las Vegas Review-Journal is the largest circulating daily newspaper in Nevada and ranked as one of the top 25 newspapers in the United States by circulation. https://en.wikipedia.org/wiki/Las_Vegas_Review-Journal
The article was about casino company CEO compensation, and how a number of Las Vegas-based CEOs had reduced their salaries in exchange for RSUs amid the pandemic, with the reporter wondering what their compensation might look like down the road.
In the course of our interview, I suggested a number of benefits from this exchange executive compensation strategy of a cash bonus exchanged for RSUs — both to benefit the executive personally but to benefit the company and company stakeholders, including the following:
- Deferral of taxation that would come from immediate payment of the bonus, and deferral of taxation on the unvested portion until vesting has later occurred.
- Leverage of the amount of bonus magnified by the growth potential of the RSU, still further enhanced by the current low value due to the pandemic
- Assurance of a future payout to the CEO by use of RSUs rather than options because RSUs after vesting always retain some value. RSUs effectively have a floor on value. They can never go underwater and become worthless as often happens with stock options.
- Use of the extra RSUs / redemption strategy to minimize effective taxation as RSUs vest, where in this way the company would typically pay for or assist in payment of the taxation, and the executive is more willing to pay a portion of the taxes since vesting has occurred.
- The benefit to company morale from the “vote of confidence in the company’s future” by the CEO choosing company stock over cash.
- The potential cascading benefit to the company with current employees and future hires who are heartened by the example of the man or woman at the top choosing company equity over an immediate cash payout.
- Benefit to investors, alliance partners and other stakeholders by enhanced “alignment” of the CEO’s financial prospects tied to company growth.
To see this full article on CEO use of RSUs in the Las Vegas Review-Journal , go to LINK:
The business reporter who authored this article, Bailey Schultz, said she had found me and reached out to me after reading an earlier article I wrote on RSUs that was published in CEO World. That article, published February 28, 2017, was entitled “The Advantage of RSUs in Your CEO Compensation Package.”
My 2017 RSUs article, targeted toward CEOs, C-Suite executives and other senior level executives, discussing the benefits of RSUs as a key part and often the most important part of their compensation package. The article discussed how RSUs are most useful in mature companies where the CEO or C-suite executive takes a position where stock has considerable value, but growth is still expected in the public company or perhaps an IPO or liquidity event is not far off or in a turnaround situation in a mature company where there is no assurance of appreciation and the CEO needs assurance of a floor in his or her equity value.
As part of my overall discussion of RSUs, my 2017 article covered these topics –
- What are RSUs? When are RSUs paid out?
- How are RSUs taxed? How do you pay the taxes that come due on RSUs?
- When are RSUs most useful? When are RSUs least useful?
- What sort of RSU package should a CEO or C-suite executive look for?
- Key Terms to negotiate in RSU grants
To see my full article, go to LINK: http://ceoworld.biz/2017/02/28/advantage-rsus-ceo-compensation-package/ or http://www.executiveemploymentattorney.com/articles-section/the-advantage-of-rsus-in-your-ceo-compensation-package/
It is my hope that this article will be of benefit to CEOs, C-level and senior executives who might benefit or whose companies might benefit from the use of RSUs as part of the executive compensation package. If you or any colleague of yours has a need in this area, please do reach out to me at email@example.com.