Tax issues—how pay is taxed, when, and whether that tax can be deferred—can be a key driver in designing executive pay packages.
The potential tax impacts of executive pay decisions, both for the company and for the executive, can affect how executive compensation is structured. Here, we explain the key tax issues that compensation committees should understand in order to design effective executive compensation programs.
Imagine your company’s leadership is in transition, and after an exhaustive search, the board has found the perfect CEO candidate. Next up: negotiating the employment agreement. The parties will need to agree generally on the dollar figures at play, but just as importantly, how will it be paid? How much in cash? How much in equity? What kind of equity—options, restricted stock, restricted stock units? What will the vesting conditions look like? Can any of the payments be deferred?