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Hypothetical Earnings Trigger Real Bonus Payments

Wednesday, November 13, 2013

Federal income tax incentives motivate questionable compensation decisions that benefit executives at the expense of taxpayers and shareowners.

The Revenue Reconciliation Act of 1993 caps the deductibility of executive salaries at $1 million, but bonus payments of any amount are deductible if they result from the achievement of established performance goals. Many public companies today take advantage of the performance-based bonus payment system, using misleading bonus calculations to give "superior performance" bonuses at the expense of shareowners and taxpayers... Read More

Curtis C. Verschoor - AccountingWeb.com