A Chance for Corporate Executives to Help with the Financial Crisis

A 1974 Law made it possible for Corporate executives to delay taxes on compensation like a gigantic 401 or IRA but without the limitations that us mere mortals are stuck with Now there is an opportunity for them to help with the financial crisis.

Some well known CEO's have deferred income on millions of dollars each year, like one of the most extreme cases, Roberto Go1zueta of Coca Cola in 1992. He was given 1 million shares of Coca Cola worth 81 million dollars at the end of 1991. The compensation was not reported as part of his compensation in the stockholder reports but was buried in a footnote in the report.

Since then executives everywhere have used his case as a model for increasing their wealth. They are allowed to defer as much compensation as they want- unlimited. The money is usually placed in a trust account for them while being kept on the company books as a liability. The company must forgo taking the income tax relief for the expense until it is withdrawn. Many of these deferred incomes draw interest at high levels, as much as twelve percent. Some have the option of taking interest or company stock at a initially fixed price, with an override that if the interest rate is chosen but the stock price moves higher, the executive gets the highest total dollar compensation.

According to David Cay Johnston in his book, "Perfect Legal" - "While these plans were carefully designed to conceal their true costs, that does not change the fact that there is no free lunch. The true price of deferral may be hidden, but it must be paid somehow and by someone. Those someones included millions of people whose careers were ended prematurely by the forced retirements that began sweeping through Corporate America in the late eighties. They included people who were never hired because payrolls shrank. They even extended to people who instead of solid jobs at big companies had to settle for work at discount wages, with few benefits, at firms created to do the work the big companies outsourced. They extended to people who kept their jobs at big companies, but had their health and retirement benefits trimmed and sometimes eliminated."

Congress needs to eliminate this loophole to increase taxes today. Corporations should discontinue giving the deferrals then they would not need to make loans to create new jobs and capital.

I keep trying to finish the above mentioned book but I can usually only read a page or two at a time then I have to take a blood pressure pill to control my wrath.

P.S.- Entertainers and Athletes get the same deferral deal. Please get mad and write to your representatives.