Comments on: Is Executive Pay a problemlem with the Perceived Supply?

By: David Foster

David Foster — Thu, 22 Dec 2005 21:48:03 +0000

Remember, Nardelli was in a particularly strong negotiating position because he was one of the three finalists for the top job at GE (the others being Jeff Immelt, who got the job, and Jim McNerney, who is now at Boeing) This may well justify a higher compensation than would otherwise be expected, but it doesn’t justify any obfuscation of same)

By: Rob

Rob — Thu, 22 Dec 2005 21:42:50 +0000

Part of the pRoblem is what you just addressed – that there seems to be an intentional attempt to mislead and misrepresent his salary.

By: David Foster

David Foster — Thu, 22 Dec 2005 21:35:44 +0000

I *am* a Home Depot sharholder, and am not real happy with this. If the board wants to pay Nardelli $2 million after taxes, then they should pay him $3.7 million *before* taxes (or whatever the number calculates out to be) and report it in the normal manner. Doing it the way that was reported comes across as obfuscation, whatever the true intent may be.

Per Ethan’s comment, I’m pretty sure there is no tax benefit to the company in doing it this way. From an IRS perspective, the payments still should be compensation to the employee.

By: Ethan

Ethan — Thu, 22 Dec 2005 20:40:33 +0000

I’m no accountant, but I suspect the “$2 million and all that other crap” thing happens not because the recipients are particularly geniuses, it’s because it allows the company to send a huge chunk of money somewhere that isn’t taxed the same way as it would be if paid out, say, as raises or bonuses to the rank and file.

I don’t know any of this for a fact, but from an arm’s-length point of view, I find it interesting that people get paid (at times) exorbitant consulting fees that the company would normally never pay out as salary to anyone else. I’m thinking it’s (legal) smoke-and-mirrors.

I could just be a bitter member of the rank and file. Salt the above thoroughly before ingesting.