We use cookies to collect information about how our website is used and to improve the visitor experience. You can change your browser’s cookie settings at any time. Please review our privacy policy for more information. OK
Margaret H. Black, a managing director in the Los Angeles office of Pearl Meyer & Partners LLC, said during the [firm’s] Feb. 12 webcast that excise tax gross-ups “have been the poster child of problematic pay practices in the press and also with institutional shareholders.”
Daniel M. Wetzel, a Pearl Meyer & Partners managing director and head of the consulting firm’s Los Angeles and San Francisco offices, said that in the “more performance-focused, post-gross-up environment,” there have been significant changes in the way boards and management design and communicate executive compensation programs. Although tax gross-up provisions are contingent programs that only occur during a change-in-control, they involve significant dollars and have tax implications, depending on plan design, he said. Wetzel said change-in-control is less likely among the top 50, so that their programs may be more conservative and the pay mix may differ from that of other companies. Nevertheless, the top 50 companies are trendsetters in compensation design and their programs are worth studying, he said.
“We have dual Internal Revenue Code regulations, Sections 280G and 4999, which are technically extremely complex, and the outcome of that is the value provided to executives can be significantly different than what was intended by the board when the program was initiated,” Wetzel said, referring to tax code sections on golden parachute payments.
Wetzel said that companies should consider how often they will review change-in-control provisions, how they will be implemented, and what flexibility the company has to make changes when it is “in the throes of a real deal.”