August 18th, 2011
Volume 4, No. 6

In this Issue:

Changes at SOS

In Memoriam: Raj Renkuntla

Aspirations 2011 Recap

August Market Research Survey

Accounting Answers: Diluted EPS FAQs

Free SOS Educational Webcast - Hindsight is 20/20: IPO Lessons Learned

Free SOS Solutions Webcast - 6039: Nifty Ways to Make it Better

SOS Product Spotlight: People Solutions Interim Staffing

SOS Xposé

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Email Xpress Demo

From the SOS Webcast Archive -

Getting Crafty with Crystal: Solving Stock Plan Reporting Issues with Crystal Reports

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Changes at SOS

Although I am not a fan of change for change's sake, I am invigorated when there is an opportunity to make positive, controlled change. 2011 is a year of possibilities. I am excited to announce that the SOS Team is taking advantage of a variety of ways for us to change and grow.

As you likely are aware, we just held our first Aspirations Conference for private, emerging companies. At a time where companies are gearing up for their IPO, the SOS Team jumped into action. We identified important topics to cover, secured industry-leading speakers, locked in a great location, and met the goals set as to the attendee numbers. Within a very short timeframe, we were able to put together an event that exceeded all expectations.

Another big change for us is the relocation of Sean Lembree to the Dallas Metro area of Texas. We feel there are tremendous opportunities in that area of the country. Throughout his tenure here at SOS, Sean has held a variety of roles in Sales and Management, including President & CEO over the last five years. Sean will continue to hold the position of President for SOS. His focus will be increased in our Partnerships and Sales while continuing a focus on other leadership initiatives as well as maintaining a similar role within the Executive Management Team. While we will miss having Sean in the office every day, this is a great opportunity for Sean and we are thrilled to be able to support him while still benefiting from his relationships, knowledge, and expertise. Look out Texas!!

With Sean's move, we took a hard look at other changes this opened for the rest of the executive team and SOS. Our first decision was that I will step back into the role of CEO of SOS. This allows Barrett Scott to concentrate more of his time on People Solutions/Staffing, supporting Andrea Best as she continues to lead the division. Henley Hom will continue to manage and grow our outsourcing division. Steve Gaylord leads the Tech Projects, Tech Products and Data Solutions while adding Internal Automation & Efficiencies. Elizabeth Dodge is our VP of Product Management, leads our Accounting group and now manages our Strategic Solutions group as well.

After 12 years in business, SOS continues to find ways to change in order to bring the best people, services, expertise and technology to our industry. Supported by such an amazing team, I am thrilled to help guide SOS into the future as the returning CEO.

Marianne Snook, CEO
Stock & Option Solutions


In Memoriam: Raj Renkuntla

Raj Renkuntla, The Man no one ever forgets. SOS will miss Raj after his passing on June 27th from a struggle with cancer. Everyone who knew Raj has a story, and every story paints a little different picture of a man who brought so much to his family, friends, clients, and to all of us at SOS. Raj was funny, genial, quietly confident, extremely bright and hard-working, and, most famously, a little mysterious in his ways. He worked long hours, starting and stopping according to a schedule that was completely unpredictable. But when Raj said "we can do it", and "it will be done" in the soft-spoken way we all knew and loved, you understood he had a complete grasp of the project at hand, and that you needn't worry about the outcome.

His favorite word was "yes", and this single word encapsulated his positive approach to everything he was involved with. It was also the only word you might get out of him for an entire meeting! But, for a man of few words, Raj was extremely easy to talk to, and had a gift for being able to remember everything you ever told him. More often than not, he would show up at your cube, recall the unsolvable issue, and let you know he had the solution. Of course, he had promised he would think about it, and even after everyone else had given up , he never wanted to let you down. You knew he wouldn't, and he never did.

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Aspirations 2011 Recap

SOS is extremely pleased to report our first ever conference, Aspirations 2011, which focused on equity compensation issues and challenges facing emerging private companies was a HUGE success! Aspirations 2011 was held on July 26th at the Santa Clara Marriott and we filled the hotel with an energetic buzz of enthusiasm and eagerness to learn about the hottest topics and relevant issues each attendee was facing. Offering MCLE credits for most all sessions and CEP credits as well, Aspirations quickly became the educational event everyone wanted to attend. With 11 captivating sessions, 37 phenomenal speakers, and over 70 attendees from issuing firms, Aspirations 2011 was an event to remember.

Thanks to our 2011 Sponsors:

  • AST Equity Plan Solutions
  • Bank of America Merrill Lynch
  • OptionEase
  • Radford, An Aon Hewitt Company
  • BNY Mellon
  • EASi
  • Morgan Stanley Smith Barney
  • Solium Capital| Solium Transcentive
  • SVB Analytics
  • Equity Methods
  • National Center for Employee Ownership
  • Certified Equity Professional Institute
  • Two Step Software, Inc.
Now on to planning for Aspirations 2012! We'll keep you apprised of our progress in the coming months!

August Market Research Survey

Complete the survey and be entered into a drawing for a $100 Visa gift card!

Periodically, SOS will ask for issuing companies' participation in a market research survey to enhance our understanding of current practices and trends in the industry and to provide our clients insight into the practices of other issuing firms. Our surveys are brief, taking no more than 5 to 10 minutes to complete. The focus of this survey is on the calculation of estimated forfeiture rates and their application to equity compensation expense.

Complete the survey today!

Please note that only issuing companies, not vendors or consultants, should complete the survey and are eligible for the drawing. Thank you for your cooperation!

Congratulations to last Xtra's drawing winner, Tim Mercer, of eHealth.

Accounting Answers: Diluted EPS FAQs

I get a lot of questions about diluted earnings per share (EPS) calculations. A lot. Maybe one or two per day, during certain seasons. For the next few Xtra's, we thought we'd recap some of the most common question and the answers. (But feel free to send in other questions as well, I love diluted EPS!)

Number 1 Most Frequently Asked Question: Why are my in-the-money Options anti-dilutive?

Equity awards can be anti-dilutive when a) they are underwater OR b) the number of shares that can be repurchased by the buyback shares exceeds the number of weighted shares outstanding. Remember that part of the Treasury Stock Method under ASC 260 is to calculate the number of shares you can buyback on the open market using the hypothetical proceeds from the award. If you can buyback more shares than are outstanding, then the impact on EPS would be to increase the EPS rather than reduce it, which flies in the face of the underlying purpose of the diluted EPS calculation - to show how low your EPS would be if all your potentially dilutive instruments were to become common stock. If the impact of a grant would be to drive EPS higher instead of lower, the grant is excluded. ASC 260-10-45-17 (formerly paragraph 13 of FAS 128) states:

"The computation of diluted EPS shall not assume conversion, exercise, or contingent issuance of securities that would have an antidilutive effect on earnings per share. [...] In determining whether potential common shares are dilutive or antidilutive, each issue or series of issues of potential common shares shall be considered separately rather than in the aggregate."
Let's consider a simple example. Let's say you have 500 shares of common stock outstanding and you have $1,000 in net income. Your basic EPS would be calculated as $1000 ÷ 500 shares or $2 basic EPS. Now let's add in an outstanding option for 100 shares. It was granted on the first day of the current period. Its price is $10 and the average market value during the period is $11. Its fair value per share is $8 and it's vesting (and therefore accruing expense) over one year.

Weighted Shares Outstanding = 100

Buyback Shares
Exercise Proceeds

(100 shares * $10 price) ÷ $11 average market value = 91 Shares
Tax Benefit Shares
(100 shares * (($1 gain - $8 fair value) * 40% corporate tax rate)) ÷ $11 average market value = -25 Shares
Average Unamortized Expense Shares
(($800 beginning unamortized expense + $600 ending unamortized expense) / 2) ÷ $11 average market value = 64 Shares
100 Outstanding shares less 130 Buyback Shares (91-25+64) = -30 Shares

Add the -30 shares to the 500 shares of common stock outstanding and you get 470 shares. Now when you divide Net Earnings by Common Stock Outstanding + Common Equivalents, you get $2.13. The existence of an outstanding option has made the diluted earnings per share look better than the basic EPS - going against the most important premise of ASC 260. So any grant in which buyback shares is greater than weighted shares outstanding is excluded from the calculation. Hence in-the-money grants CAN be anti-dilutive.

(Note: this occurs most often early in the life of a grant, when there is a lot of unamortized expense and therefore a lot of buyback shares.)

In the upcoming months we will cover questions such as:

RSUs & PSUs - how and why are they anti-dilutive?

Why do I have negative buyback shares?

Why is unamortized expense included?

Why are my performance grants not showing on my diluted EPS reports?

Elizabeth Dodge, CEP
Stock & Option Solutions


Elizabeth is the Vice President of Product Management for Stock & Option Solutions, Inc. (SOS). Her responsibilities include monitoring new developments in the equity compensation arena, performing market research, speaking at industry events and helping to define the product roadmap for SOS.

Elizabeth regularly speaks on industry trends and product development at client and industry events including NASPP and NCEO webcasts, GEO and NASPP Chapter meetings, and the NASPP Annual Conference. She was also selected to speak at the West Coast FASB Roundtable on FAS 123(R) and co-authors the chapter on accounting for equity compensation in The Stock Options Book, by Alisa Baker. She became a Certified Equity Professional in 1999 and continues to volunteer for the Certified Equity Professional Institute as well as serving on the CEPI Curriculum Committee. She is also the president of the Silicon Valley Chapter of the NASPP and serves on the Board of Directors of the NCEO.

Free SOS Solutions Webcast:

6039: Nifty Ways to Make it Better

August 25th, 2011

Click here to register.

As an SOS Solutions webcast, this event will cover SOS products and services. It does not contain solely educational content, and therefore does not offer continuing education credits.

Please join us for our next SOS Solutions webcast on August 25th at 11am Pacific Time, 2pm Eastern Time.

In 1975 Paul Simon released an album with the hit song 50 Ways to Leave Your Lover. The opening lines struck a note with the SOS 6039 Team: "The problem is all inside your head, she said to me. The answer is easy if you take it logically." When it comes to 6039, we'd like to help you in your struggle to be free from all of the headaches, and we have come up with some Nifty Ways to Make it Better.

If compliance with 6039 last year was wrought with more challenges than you imagined; the data you thought was clean required tweaking, creating the IRS e-file was not quite as simple as you hoped, and it took much more labor to manage the printing, stuffing and mailing of statements than you planned, we can help.

Please join us on August 25th to learn more about our suite of products and services that will be spotlighted during this webcast:

- Consent website
- Data audit
- Participant portal
- Electronic statements
- Signed, Sealed, Delivered: Mailing Fulfillment
- IRS e-file
In this SOS Solutions Webcast, the 6039 Team will start with a brief refresher of the requirements of 6039, share experiences from last year, discuss the steps you can take now to get ahead of the curve, and share these nifty solutions that you can implement to make 6039 a simplified process every year. Speakers:

Free SOS Educational Webcast

Hindsight is 20/20: IPO Lessons Learned

September 15th, 2011

Click here to register.

Please join us for our next educational webcast on September 15th at 11am Pacific Time, 2pm Eastern Time.


One of the most talked about sessions at the recent SOS Aspirations Conference for emerging private companies was "Front Lines", where panelists from Tesla Motors and LinkedIn spoke about their experiences taking their equity compensation programs through the IPO process. Taking a page from the same book, this webcast will focus on the valuable lessons learned by another recently public company, the Chicago Board Options Exchange (CBOE).

Our panelists will take you through the unexpected twists and turns that CBOE faced, tell the story of how these challenges were addressed, discuss what they wish they had known before going down the IPO path, and finally, offer practical insight into how you can navigate the IPO process and minimize the impact of the unexpected.

They say "you don't know what you don't know", so this is your opportunity to gain wisdom that only comes from experience, and obtain a more complete understanding into the complex process of preparing your stock plans for an IPO.


(One hour of Certified Equity Professional continuing education credit is available for attending. See the CEPI website for more information on CEP continuing education requirements.)

SOS Product Spotlight: People Solutions Interim Staffing

Tonya Epps at The Walt Disney Company Corporation in Burbank, California

In December of 2010, The Walt Disney Company Corporation (Disney) came to SOS looking to replace their stock administrator who moved on to a different department and asked that the resource we send have experience in equity compensation, stock administration, and knowledge of Merrill Lynch and SAP. Tonya Epps fit the bill and traveled to Burbank, CA from Tennessee to pick up where their former stock administrator left off. Though the project was slated to end in February of 2011, she was extended an additional month to ensure that the client was fully prepared for her departure. Being familiar with the databases they use and leveraging her equity compensation knowledge, Tonya identified opportunities to make process improvements. She pointed out ways to enhance reporting for options outstanding and assisted with testing output of their optionee report. It was a relief to Disney that they did not have to train on their internal and vendor systems, it already being a busy time of the year.

Tonya is most proud that through the demonstration of her knowledge and expertise, she was able to gain Disney's trust that she could handle anything that they gave her. It makes her feel good to know that they can rest assured that the work she does will be accurate and timely. This allows management to focus on other things. Of her experience at Disney, Tonya has this to say: "The Walt Disney Company treated me as if I were an employee. I thoroughly enjoyed my time working and interacting with everyone."

As a traveling consultant, Tonya has an opportunity to not only meet new people, she gets to tour new places. Although she has been to Southern California many times before, it is always good to be in a different part of the region and see the sights. She went to a Lakers Game and was able to be a part of the local culture. Despite some of the misperceptions about consultants traveling home, Disney has never had any issue with her traveling home when needed on the weekends during her assignment. They always made sure that she had everything that she needed each time she traveled home. From her perspective, clients have always accommodated the travelling needs of the consultants.

When asked about the work Tonya performed there, Lisa Griffin, Stock Plan Manager at Disney, told us "I could not have asked for a better fit. We would not have gotten through our busy season without Tonya!"

SOS Xposé

...tender tidbits about people and players in our industry...

Change in Scenery...

New Beginnings... Matt Ward has landed at Barney & Barney LLC as a National Practice Leader, Compensation Consulting...Congrats on the new position Matt!...Eric Aguirre recently joined the OptionEase team and will be serving as a Senior Solutions Specialist. In his new role Eric will be working directly with OptionEase's Partner Management and Direct Sales teams to continue to grow the company's presence in the marketplace...Kim Hackman has begun a new journey into the amazon... best wishes to you in your new position with Amazon.com! Rachel Murillo has just started at E*TRADE Corporate Services as the Product Communications Segment Leader; best of luck in the new role!

SOS' own Aaron Beckman started at Novellus this summer, you will be missed at SOS! Congrats to the new addition at EASi with Christine DeLeo who is the new Customer Service Implementation Manager...And more congrats to another new addition at EASi, Thierry Vo, who has taken on the role of Senior Product Manager.

Eric Deen has joined Charles Schwab as an Education Consultant, working with their plan sponsor clients to design custom communication and education campaigns to improve participants' understanding of their equity awards. With his 13+ years of industry experience, Charles Schwab is thrilled to have him join the team...Jennifer Baehr is working at OptionEase, congrats on the new job...This Summer has been filled with many exciting changes!

Promoted...Carrie Kovac of Symantec has been promoted to Director, way to go Carrie!

New Arrivals...SOS's Scott McDonald and his wife Erin welcomed Savannah Louie to the world on July 9th; our team can't wait to meet her! Colin Donnelly of Radford, An Aon Hewitt Company, has a new addition to the family. Lydia Donnelly was born on July 10th.

Newlyweds...Jorge Martin and Heather Donaghey, both of E*TRADE Corporate Services, tied the knot on July 15th. They just got back from their honeymoon in Fiji looking tan and happy. Congrats to you both!

Down the Aisle We Go...Steven Hom of SOS popped the question and Laurie Lee said yes! Best wishes from your team!

Baby Bump...SOSer Vanessa Harrison and her husband Stephen are expecting a baby in January 2012 to help ring in the New Year!

Survey...The NCEO has a new survey for private companies on equity granting practices in entrepreneurial companies. Take this quick survey and get the results at no charge

Industry News...Corporate Focus released Version 6.7 on August 14th bringing with it new features, improved security and more powerful, redundant hosting infrastructure. Read the press release

Paid 2011 (Performance Award Immersion Day) is a unique event being sponsored by Orrick, Radford, Stock & Option Solutions and Performensation. The event will be held October 14 in the Silicon Valley. The morning will be focused on "The Nuts and Bolts of Execution, Accounting and Reporting". The afternoon will be focused on "The Art and Science of Global Strategy, Design and Compliance". Take a look at the PAID 2011 Agenda for more details. Register by contacting any PAID 2011 host.

Cooley will be holding its annual Jumpstart Your Year End Compensation Disclosures! program in Palo Alto on September 27, so please save the date. The Jumpstart program this year will focus on lessons from the first year of Say on Pay, including how to approach any changes that are needed to your compensation program in light of your vote results. Speakers are expected to include Cooley's own Wendy Davis and Amy Wood, as well as Ann Costelloe of Towers Watson and Reid Pearson of Alliance Advisors. Contact Cooley's Kareen Lambert at 650 843 5145 for details.

CEP...Your accountant is a CPA. Your lawyer passed the Bar. Only a CEP should touch stock plans. Make sure you have the right qualifications for a career in equity compensation. Register by September 23 for the November 5th exam. Also be sure to check out the special offers if you take the exam in conjunction with attending the NASPP conference!

CEP Symposium - Save the Date and RFP If it isn't on your calendar yet, be sure to save March 27, 2012 for the newly redesigned CEP Symposium. And, the CEPI is calling all speakers. Submit your proposal for consideration to be part of this event!

Did you miss an issue of Xtra? View our complete newsletter archive from our website here
Miss a webcast? You can find links to recordings, as well as the materials, on our Webcast page

Information provided in this newsletter is designed for educational and entertainment purposes only and is not provided as professional service or advice. Moreover, this newsletter should not be relied on as legal, accounting, auditing, or tax advice. Anyone reading this newsletter should not act upon this information without seeking professional counsel and/or input from their advisors. The preceding information does not necessarily represent the official views of Stock & Option Solutions, Inc. with respect to any of the issues addressed.
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