Recent Development in Taxation

Costello, James M.
January 1984
Journal of Accounting, Auditing & Finance;Winter84, Vol. 7 Issue 2, p182
Academic Journal
This article provides information on taxation of executive compensation in the U.S. The primary objective of any cost-effective executive compensation plan is to develop a pay scale that is commensurate with the level of responsibility and degree of success of the employee. Further, if an employer is to be competitive with other employers in hiring and retaining executive talent, the compensation formula must be flexible enough to accommodate use of tax-deferral techniques, provide for taxation of some portion of an executive's wealth accretion from his labors at the long-term capital gain rate, or some other favorable rate, permit exclusion from taxable income of certain economic benefits received by the executive as a result of the employment relationship, and provide a satisfactory degree of job security. The area of executive compensation will be a continuously evolving one as long as companies continue to compete for top executive talent. There is a trend toward greater use of multiple option plans and compensation plans based on performance. Innovative techniques such as junior stock plans should gain widespread use in anticipation of the projected favorable stock market performance throughout the 1980s.


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