Executive Pay Trends and Golden Parachute Tax: A Collision on the Horizon

Johnson, David G.
March 2004
Benefits Quarterly;2004 First Quarter, Vol. 20 Issue 1, p30
Academic Journal
Ironically, many corporations will likely discover that tying equity-based executive compensation more closely to performance will cost millions of dollars when there is a merger or acquisition. The reason: internal Revenue Code Section 280G, which is designed to discourage "excess" parachute payments, often assesses a significantly higher toll on performance-based compensation than on time-vested equity payments. There is no magic remedy, but advance planning can often help mitigate the impact. This article describes the dilemma and suggests several approaches to the challenge.


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