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25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

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  • 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

    Now that's funny...or not.

    http://www.reuters.com/article/2011/...77U0KW20110831

    (Reuters) - Twenty-five of the 100 highest paid U.S. CEOs earned more last year than their companies paid in federal income tax, a pay study by a Washington think tank said on Wednesday.
    At a time when lawmakers are facing tough choices in a quest to slash the national debt, the Institute for Policy Studies, a left-leaning group, said it also found many of the companies spent more on lobbying than they did on taxes.
    The senior Democrat on the House of Representatives oversight committee, Elijah Cummings, called for hearings on executive compensation "to examine the extent to which the problems in CEO compensation that led to the economic crisis continue to exist today."
    Several companies mentioned in the report took issue with its methodology and said they paid all taxes owed.
    General Electric spokesman Andrew Williams called the study "inaccurate" and noted it did not include significant income taxes paid in 2010 for previous years, or state taxes paid. "GE pays what it owes," he wrote in an e-mail response to questions.
    Boeing spokesman Chaz Bickers said the study is "simply wrong".
    Instead of Boeing's reported "U.S. federal current tax expense" of $13 million which the IPS used, he said a better approximation of the company's taxes paid would be the $360 million it reported as its net income tax payments, most of which, he says, was federal.
    "On federal cash tax payments last year we paid in the hundreds of millions," Bickers told Reuters. The company also received a $371 million credit from the government last year for overpayment of taxes in the past, and has added 5,000 U.S. jobs this year Bickers says, in part because of Federal tax breaks.
    The institute compared CEO pay to current U.S. taxes paid, excluding foreign and state and local taxes that may have been paid, as well as deferred taxes which can often be far larger than current taxes paid.
    The group's rationale was that U.S. taxes paid are the closest approximation in public documents to what companies may have actually written a check for last year. It said deferred taxes may or may not be paid.
    The accounting used in SEC filings differs from the accounting used to tally what's owed on a corporate tax return. Neither the IPS number nor the figure cited by Boeing exactly equals the check written to the IRS, says Scott Dyreng, an assistant professor at Duke's Fuqua School of Business who studies corporate taxes, and though companies could disclose that figure, don't have to and don't do so.
    $16.7 MILLION AVERAGE
    Compensation for the 25 CEOs with pay surpassing corporate taxes averaged $16.7 million, according to the study, compared to a $10.8 million average for S&P 500 CEOs. Among the companies topping the IPS list:
    * eBay whose CEO John Donahoe made $12.4 million, but which reported a $131 million refund on its 2010 current U.S. taxes.
    * Boeing, which paid CEO Jim McNerney $13.8 million, sent in $13 million in federal income taxes, and spent $20.8 million on lobbying and campaign spending
    * General Electric where CEO Jeff Immelt earned $15.2 million in 2010, while the company got a $3.3 billion federal refund and invested $41.8 million in its own lobbying and political campaigns.
    Though the companies come from different industries, their tax breaks fall into two primary areas.
    Two-thirds of the firms studied kept their taxes low by utilizing offshore subsidiaries in tax havens such as Bermuda, Singapore and Luxembourg. The remaining companies benefited from accelerated depreciation.
    Shareholders have responded favorably when companies in which they invest keep a tax bill low through legal methods, thereby benefiting earnings. But Chuck Collins, an IPS senior scholar and co-author of the report, said that is a mistake.
    "I think it's an exposure of weakness in a company if their profitability is dependent on their accounting department and not on making better widgets," he said.
    In prior reports, Collins said, out-sized CEO pay was often a red flag of bigger problems to come. The IPS has been putting a pay report together for 18 years. Among those whose leaders have made the high pay list in years past, only to have their businesses falter: Tyco, Enron and WorldCom.

  • #2
    Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

    Originally posted by c1ue View Post
    I think the management consultants call this "Pay for Performance"...

    Comment


    • #3
      Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

      A rational person might say that if the CEO "makes too much" then it's not a good investment as it's run less efficiently than competitors. Nobody's forcing anybody to buy the stock last I heard.

      If one argues that they ALL make too much, you'll have quite a time figuring out what the right amount should be.

      What say we let liberty prevail and those who think they're making too much don't buy the stocks, and those who don't buy them, and see who makes more money as a lowly stockholder?

      There are indeed boards and management that seem to drain the money from corporations in some quid pro quo arrangement. But it takes a good deal of arrogance to think that only we see that and that the millions of stockholders out there are too dumb to eventually figure this out.

      Until you find a company with what you think is reasonable compensation and that is performing well, don't buy it. Pretty simple, doesn't require destroying others' liberties to do it, either.

      Comment


      • #4
        Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

        CEO's generally have great incentive to keep costs down throughout the company, but no incentive to keep the cost of their own salary down. It's an adversarial position that exists because of the nature of how most companies are set-up.

        The corporate tax system is a beast in itself, and no message deriving from comparisons with it other than to illustrate how bizarre it is should be taken with anything other than a grain of salt.

        Comment


        • #5
          Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

          Originally posted by SalandRichard
          There are indeed boards and management that seem to drain the money from corporations in some quid pro quo arrangement. But it takes a good deal of arrogance to think that only we see that and that the millions of stockholders out there are too dumb to eventually figure this out.
          No, it is recognizing a broken system when shown it.

          Millions of stockholders are morons. That is abundantly clear from the last 12 years of stock market action.

          Comment


          • #6
            Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

            Originally posted by SalAndRichard View Post
            ...Nobody's forcing anybody to buy the stock ...What say we let liberty prevail and those who think they're making too much don't buy the stocks,... the millions of stockholders out there are too dumb to eventually figure this out. ...until you find a company with what you think is reasonable compensation and that is performing well, don't buy it. Pretty simple, doesn't require destroying others' liberties to do it, either.
            Your point is obviously correct in principal, but impossible in practice. Most folks own stocks through a workplace 401K with a very limited menu of options-a small cap mutual fund, a large cap mutual fund, an aggressive growth mutual fund...

            Ownership of modern large corporations is diffused in this way, so that the zillion little shareholders are largely unaware that they even own the shares of company X. If they did do the work to find out, they still have no choice but to buy one of the half dozen mutual funds on their company 401K menu.

            That's one of the fundamental problems with large modern corporations -the old-fashioned concept of powerful and knowledgeable owners watching senior management like a hawk just really doesn't exist any more. Senior management is essentially unsupervised and uncontrolled at the Fortune 500 companies.

            Comment


            • #7
              Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

              Originally posted by thriftyandboringinohio View Post
              Your point is obviously correct in principal, but impossible in practice. Most folks own stocks through a workplace 401K with a very limited menu of options-a small cap mutual fund, a large cap mutual fund, an aggressive growth mutual fund...

              Ownership of modern large corporations is diffused in this way, so that the zillion little shareholders are largely unaware that they even own the shares of company X. If they did do the work to find out, they still have no choice but to buy one of the half dozen mutual funds on their company 401K menu.

              That's one of the fundamental problems with large modern corporations -the old-fashioned concept of powerful and knowledgeable owners watching senior management like a hawk just really doesn't exist any more. Senior management is essentially unsupervised and uncontrolled at the Fortune 500 companies.
              It's just another manifestation of the corrupting of America [and a few other places too]. Management are accountable to the Board of Directors, and it is the Board that is supposed to represent the interests of shareholders [whether public or private]. Too many Board members in too many companies act as though they are beholden to the Sr. Executives. Sometimes this is the case in private companies, where the founding CEO stacks the Board with compliant cronies. But there is NO excuse for shareholders putting up with this in a publicly traded company. The institutional fund managers that hold the stock on behalf of pension or mutual fund holders aren't doing their job either...

              Comment


              • #8
                Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

                Originally posted by GRG55 View Post
                ... where the founding CEO stacks the Board with compliant cronies. ..
                I love that turn of phrase, it's going to be my new working definition.

                Board of Directors (noun) 1. A stack of compliant cronies selected by the CEO for the purpose of sharing lunch once each calendar quarter. See also "rubber stamp".

                Comment


                • #9
                  Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

                  The 401k was probably one of the worst things to happen to Americans since 1913.

                  Don't forget the CEO is often the "chairman of the board".

                  Free markets don't have 401k plans. Free markets don't have government bail outs.

                  You can't blame this all on the bag holders.

                  Comment


                  • #10
                    Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

                    I call them the Back scratching club.

                    Comment


                    • #11
                      Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

                      And why this analysis is ridiculous:

                      http://blogs.reuters.com/felix-salmo...-pay-in-taxes/

                      You might well have seen, this morning, the news that 25 of the 100 highest paid US CEOs earned more last year than their companies paid in federal income tax. The Reuters version of the story was linked to by the WSJ and retweeted by David Leonhardt; the NYT version already has 120 comments. Both versions, it seems, were based on embargoed copies of this report from the Institute for Policy Studies; because the reporters were given a copy of the report before it went up online, they were unable to link to it from their stories.

                      But if you do manage to find the IPS website and follow the links to download the full 46-page report, you’ll see that there’s less to it than meets the eye. Certainly it doesn’t come close to demonstrating that its title — “The Massive CEO Rewards for Tax Dodging” is justified. Yes, CEOs get paid vast sums of money. And yes, a lot of corporations pay very little in taxes. But what the report doesn’t do is demonstrate that CEOs who reduce their corporate tax rates get paid more. This kind of thing, from the NYT story, notwithstanding:

                      The authors of the study, which examined the regulatory filings of the 100 companies with the best-paid chief executives, said that their findings suggested that current United States policy was rewarding tax avoidance rather than innovation.

                      There are lots of ways that the authors of the study could have tried to back up that assertion. For instance, they could have taken a set of CEOs and split them into two groups: those who are paid more than their companies pay in taxes in Group A, and those who are paid less than their companies pay in taxes in Group B. Then they could have compared whether CEO salaries in Group A were higher than CEO salaries in Group B.

                      But they didn’t do that.

                      Instead, they did this:

                      Of last year’s 100 highest-paid corporate chief executives in the United States, 25 took home more in CEO pay than their company paid in 2010 federal income taxes.

                      These 25 CEOs averaged $16.7 million, well above last year’s $10.8 million average for S&P 500 CEOs.

                      Do you see what they did there? The initial set of CEO was the 100 highest-paid CEOs in the country. They then took 25 of those CEOs, and instead of comparing their pay to the pay of the other 75 CEOs in the group, they compared their pay to the average pay for a CEO in the S&P 500. This proves nothing: any subset of the 100 highest-paid CEOs in the country is going to have higher average pay than S&P 500 CEOs in general.

                      As for the central conceit of the paper — the one which made the Reuters and NYT headlines — that’s pretty silly too. 25 CEOs make more than their companies pay in taxes? Wow! Except, it turns out that only five of those 25 companies are paying any taxes at all, by IPS methodology. The lowest-paid janitor, at those 25 companies, makes more than the company pays in taxes. The driving force behind the IPS result is entirely a function of how IPS calculates the corporate effective tax rate, and the ease with which that can go negative. It has nothing at all to do with CEO pay. (The IPS ignores deferred taxes, which is justifiable; it ignores taxes paid to foreign governments, which is less so, in an era of global corporations operating in dozens or even hundreds of tax jurisdictions.)

                      This is one good reason, then, for every news organization to link to reports they’re writing about — doing so gives their readers the opportunity to see for themselves whether the report stands up to scrutiny. After all, the world of embargoed reports is clever that way. If you’re a think tank, you send them out to lots of journalists. Some will look at them and see little news there; they will ignore the report. Others will buy it, and write the report up. So the only stories you see about the report are from journalists who buy into its thesis. That’s a bias right there. And always linking to the report is one good way of helping readers and news organizations overcome that bias.

                      Comment


                      • #12
                        Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

                        Originally posted by the Fish via Scot
                        As for the central conceit of the paper — the one which made the Reuters and NYT headlines — that’s pretty silly too. 25 CEOs make more than their companies pay in taxes? Wow! Except, it turns out that only five of those 25 companies are paying any taxes at all, by IPS methodology. The lowest-paid janitor, at those 25 companies, makes more than the company pays in taxes. The driving force behind the IPS result is entirely a function of how IPS calculates the corporate effective tax rate, and the ease with which that can go negative. It has nothing at all to do with CEO pay.
                        Thanks for pointing this out.

                        I already knew F. Salmon was a corporate sellout, and this article reinforces that existing view.

                        The statement above is made to appear as if CEO pay wasn't outrageous (which it is) and the amount of taxes paid by these 25 companies isn't ridiculously low (which they are).

                        The fact that these CEOs receive more cash than their multi-billion dollar revenue, multi-billion dollar profit companies pay in taxes is simply the most ridiculous juxtaposition possible - not any indication per se that CEO pay is a function of tax avoidance, though that may be possible.

                        Comment


                        • #13
                          Re: 25% of top 100 highest paid CEOs get paid more than their corporation pays in federal taxes

                          Originally posted by c1ue View Post
                          The statement above is made to appear as if CEO pay wasn't outrageous (which it is) and the amount of taxes paid by these 25 companies isn't ridiculously low (which they are).

                          The fact that these CEOs receive more cash than their multi-billion dollar revenue, multi-billion dollar profit companies pay in taxes is simply the most ridiculous juxtaposition possible - not any indication per se that CEO pay is a function of tax avoidance, though that may be possible.
                          Actually, the statement seems to pretty clearly point out a facet that is not apparent in the headline of the original article. Lies by omission occur quite often when ideologies are on the line.

                          Comment


                          • #14
                            Google : 8million in corporate tax in UK. 6billion in revenues. In six years.

                            Google : 8million in corporate tax in UK. 6billion in revenues. In six years.

                            Google says it would pay more tax in UK

                            Eric Schmidt, executive chairman of Google, has blamed the (UK) Government's weak tax laws for the fact it has paid just 8m of corporation tax in Britain despite making more than 6bn in revenues in this country in the six years to 2010.

                            And they only employ approx 1000 people in the UK. Even accounting for salaries that is an extraordinary amount of cash sucked out of a country.

                            But as pointed out it's not the CEOs fault and the article misses out the issuel of corporate tax avoidance.

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