Twenty years ago Congress tried to exert some control over the amount of money that an executive could take from a company in which there has been a "change in control", i.e., they tried to limit the size of "golden parachutes". They established a 20% excise tax on the parachute if it exceeded the executive's average annual pay over the most recent five years.
Executive talent being in such short supply (yeah, right), some companies wanted to assure that their executives were 'fairly' ( the executives define fair) compensated if the company was sold. So, they generously offered to pay the tax for these departing executives, i.e., they increase or "gross-up" the amount of money paid so that the tax due is included.
Who really winds up paying the executive's taxes? The shareholders, as usual.
1 comment:
It is amazing to me that the public does not seem concerned at all about the obscene money given to corporate management. Anyone really concerned about the corporation they head would not take a large salary - to do otherwise shows bad management. I think there should be a maximum wage as well as a minimum wage, but who in the hell cares what I think.
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