Autodesk 2015 Annual Report Download - page 61

2015 Proxy Statement 55
Regulatory Considerations and Practices
Autodesk continuously reviews and evaluates the impact of the tax laws and accounting practices and related interpretations on
the executive compensation program. For example, the Committee considers Financial Accounting Standards Board
Accounting Standards Codification Topic 718 (“ASC Topic 718”), which results in recognition of compensation expense for
share-based payment awards, and Section 409A of the Code, which affects deferred compensation arrangements, as it
evaluates, structures, and implements changes to the program.
Deductibility Limitation
Section 162(m) of the Code generally limits to $1 million the amount of compensation that a company may deduct for federal
income tax purposes in any taxable year with respect to the CEO and each of the next three most highly-compensated executive
officers (excluding the chief financial officer). Generally, remuneration in excess of $1 million may be deducted only if it is
“performance-based compensation” within the meaning of the Code or satisfies the conditions of another exemption from the
deduction limit. The compensation income realized upon the exercise of options to purchase shares of Common Stock granted
under a stockholder-approved employee stock plan generally will be deductible so long as the options are granted by a
committee whose members are non-employee directors and certain other conditions are satisfied.
The Autodesk Executive Incentive Plan and the 2012 Employee Stock Plan are structured with the intention that awards granted
under these plans could qualify for tax deductibility. However, to maintain flexibility and promote simplicity in the
administration of these arrangements, we may award other compensation under these plans, such as annual incentive cash
payments and PSU and RSU awards, that are not designed to qualify for tax deductibility under the Code.
Further, while mindful that the ability to fully deduct compensation paid to senior executives has benefits, the Committee
believes that Autodesk should not be constrained by the requirements of Section 162(m) where those requirements would
impair flexibility in compensating the executive officers in a manner that can best promote Autodesk’s objectives, which aligns
the executive officers' interests with the stockholders' interests. Therefore, Autodesk has not adopted a policy that requires all
compensation to be deductible. The Committee intends to continue to compensate the executive officers in a manner consistent
with Autodesk’s best interests and the best interests of the stockholders.
Taxation of Deferred Compensation
Section 409A of the Code imposes significant additional taxes in the event an executive officer, director, or service provider
receives “deferred compensation” that does not satisfy the restrictive conditions of the provision. Section 409A applies to a
wide range of compensation arrangements, including traditional nonqualified deferred compensation plans, certain equity
awards, and severance arrangements. To assist employees with avoiding additional taxes under Section 409A, Autodesk has
structured equity awards in a manner intended to comply with the applicable Section 409A conditions.
Taxation of “Golden Parachute” Payments
Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and
certain other service providers may be subject to an excise tax if, in connection with a change in control, they receive payments
or benefits that exceed certain prescribed limits. In addition, the relevant company or a successor may forfeit a deduction on the
amounts subject to this additional tax. Autodesk did not provide any executive officer with a “gross-up” or other reimbursement
payment for any tax liability the executive might owe as a result of the application of Sections 280G or 4999 during fiscal 2015.
In addition, Autodesk has not agreed and is not otherwise obligated to provide any NEO with such a “gross-up” or other
reimbursement or to otherwise address the application of Sections 280G or 4999 in connection with payments or benefits
arising from a change in control.
Accounting for Stock-Based Compensation
Autodesk follows ASC Topic 718 for stock-based compensation awards. ASC Topic 718 requires Autodesk to measure the
compensation expense for all share-based payment awards made to employees (including executive officers) and members of
the Board, including options to purchase shares of Common Stock, based on the grant date “fair value” of these awards. Fair
value is calculated for accounting purposes and reported in the compensation tables below, even though the executive officers
and directors may never realize any value from their awards. ASC Topic 718 also requires Autodesk to recognize the
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