The author’s introductory work, i.e., The Capitalism/Socialism Cycle – Phase II (we refer to the work as the “First Article”), heralds the introduction of a more efficient form of capitalism or Thin Capitalism (“TC”) , primed first by the Economic Recovery Tax Act (“ERTA”) of 1981 and the simple indexation of tax brackets, and then triggered with the Great Recession of 2007-2009 (“GR”), which began a de facto untangling of the symbiotic relationship that exists between American business and the Federal Government and the beginning of the end for Fat Capitalism (“FC”). In Implementing The Capitalism/Socialism Cycle – Phase II – Melting the Excessive Executive Compensation Employee Stock Option Icebergs, [we refer to this work as “Iceberg”] the author zeroes in on twelve irregularities of employee stock options or ESOs, the workhorse of FC as suggested in the First Article, the correction of which are a starting point in the conversion of FC to TC. This paper is the second installment in a trilogy that will conclude with a third paper that will offer remedies to our economic system against the backdrop of the social and cultural values of the American Experience. There is a suggestion then in this offering that there is an extraordinary amount of direct and indirect information about ESOs that is unseen and therefore virtually unknown across the multiple disciplines attendant to this critical form of stock-based compensation. It also introduces the question of how so much important information necessary for the efficient and effective functioning of this important financial instrument of capitalism could be so conveniently overlooked. It is overlooked, in large part, because it is in the best interests of those plying their trade to overlook them. Iceberg discusses twelve of its own, i.e., important ESO issues that are there but whose existence currently enjoys some type of artful or elusive status. Briefly, they are: 1. ESO taxation at grant – the U.S. Treasury vs. the Taxpayer; 2. Robinson v. U.S. [2003] – a major retrofit of Internal Revenue Code §83 (“IRC§83”); 3. Insider use of listed, exchange-traded options (“LETOs”); 4. SEC Release No. 34-60126 [June 17, 2009]; 5. The Transferable Stock Option or TSO; 6. Listed Exchange Traded Options and the Charitable Lead Trust; 7. Listed Exchange Traded Options and the Estate of the Corporate Executive; 8. The Incentive Stock Option Planning Dilemma – The Married Put; 9. Senator Levin – The Ending Excessive Corporate Deductions for Stock Options Act; 10. LETO Use in Financial Reporting – ASC 718, Compensation-Stock Compensation; 11. Emperor’s [Employer’s] Clothes-ESOs Don’t Work So Well; 12. An IRS-Approved Grant-Based Taxation Protocol for ESOs. In Iceberg, the author zeroes in on the above irregularities of ESOs as a starting point in the conversion of FC to TC. This conversion will take place in a two-part process, the first of which is a need to make current forms of equity compensation more efficient by proper tax, regulatory and investment planning. The C.A.S.H. TM method planning protocol is introduced to do just that. The second part of this process is to introduce and implement new forms of equity compensation that are, by their very nature, more efficient and effective which will obviate the necessity for such planning greatly.
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Jan 1, 2016
Joe Kainja 
Open Access
