I wanted to point out to readers a company that recently incorporated its stock ownership guidelines into its stock incentive plan document, which I had not seen previously. The amended Motricity, Inc. 2010 Long Term Incentive Plan, approved by stockholders on October 28, 2011, contains the following paragraph:
(p) Executive Ownership Representation. Executives participating in the Plan must (i) own, within five (5) years of the Option grant date, shares of Common Stock equal in value to at least three times (3x), or in the case of the Chief Executive Officer, six times (6x), the Executive's annual base salary (determined as of the last day of the fifth year following the grant date); and (ii) not be permitted to pledge shares of Common Stock or any equity award denominated in shares of the Company's capital stock as collateral for investment purposes or otherwise. For purposes of this section, ownership shall include all shares of Common Stock deemed "beneficially owned" (as defined in Rule 13d-3(d) of the Securities Exchange Act of 1934 without regard to vesting) by the Executive, shares transferred for estate planning purposes or pursuant to a court order. Compliance shall be evaluated on a twice-per-year basis, as of June 30 and December 31 of each year, and not on a running basis. Failure of the Executive to achieve the ownership guidelines within such timelines will result, in the sole discretion of the Committee, with forfeiture of the Option. When calculating the number of shares of Common Stock that an executive is required to hold hereunder, the Participant's base salary will be multiplied by three (3), and in the case of the Chief Executive Officer, six (6), and then divided by the average closing price for shares of Common Stock over the thirty (30) trading days prior to the date of calculation as set forth above. Notwithstanding the foregoing, the Executive shall be permitted to sell or dispose of the necessary number of shares of Common Stock to pay any state, federal or local tax withholdings arising solely from the exercise of stock options to purchase shares of Common Stock or vesting of restricted shares of Common Stock, if any.
I don't agree with this as a drafting approach. It reduces the company's flexibility by making it more difficult for the company to revise the stock ownership guidelines without achieving any material improvement in corporate governance. However, I welcome comments from readers.
On November 21, 1877, Thomas Alva Edison announced his invention of the phonograph, a machine that can record and play sound. In February 1878, Edison was issued the first patent for the phonograph. Other inventors had produced devices that could record sounds. However, Edison's phonograph was the first to be able to reproduce the recorded sound.