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Sunday, November 6, 2011

Do the 1% deserve it, part III

Of course, you might say that we need to pay top dollar to talent in order to keep our corporations competitive with other corporations.  But in our society, that sort of "top dollar" might well just be the first, relatively low-taxed $500 K.  After that, you start giving back to the society that made your first 500K possible.

Will this result in a "brain drain" as corporate executives move overseas and start managing the businesses from over there?  Perhaps that's a risk we're willing to take. 

A word about stock options.  I don't mind at all if executives are paid in stock options, and I find it misleading when people talk about executive compensation in terms of how much money the executives made off of their stock options.  True stock options have a value on the day they are "issued."  That's the only value that's relevant when determining what executive compensation was.  The amount an executive makes off of exercising an option should not count as income for purposes of the "cap."

Of course, there have been instances when executives have been compensated by backdated stock options.  That's different, and that's straight compensation.  For tax purposes, we obviously need mechanisms to distinguish backdated options from real options.


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