January 2, 2018
Tax Reform: P4P Becomes Salary-Based?
– Broc Romanek
This LA Times article is critical of Netflix’s move to higher salaries for top management in the face of the new tax laws. Here’s an excerpt:
The big news Friday on the executive compensation front is that Netflix is converting some of its “performance-based” pay for its top executives to straight salaries, thanks to the recently-passed tax bill. But people may be taking the wrong lesson from the change. On the surface, it looks like the five executives covered by the change are getting big raises thanks to the tax bill. But the reality is a bit more complicated. And what the new policy at Netflix really tells us is that the old “performance-based” executive compensation system always was a sham, anyway.
And this Quartz article presents this argument about why CEO pay is so high:
Many board members say there’s little reason to risk under-paying a CEO when, in terms of the company’s overall costs, the excess isn’t material, said Xavier Baeten, professor of management practice at Vlerick Business School in Belgium. Keeping stable, capable management at the company’s helm is one of the board’s duties.
Also see this article from “The Street” entitled “Activist Investors May Use New Tax Law to Push for Big Stock Buybacks”…