The Impact of Deductibility Limits on Compensation Contracts: A Theoretical Examination

• Main Authors: Halperin, Robert M., KWON, Young Koan, Rhodes-Catanach, Shelley C.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2001
• Subjects: Accounting; Corporate Finance; Human Resources Management
• Online Access: https://ink.library.smu.edu.sg/soa_research/672; http://dx.doi.org/10.2308/jata.2001.23.s-1.52
• Institution: Singapore Management University

In 1993, Congress passed Sec. 162(m) of the IRC. This section disallows a deduction for compensation in excess of $1 million paid to the CEO and the 4 highest compensated officers other than the CEO of a publicly traded corporation unless the excess is performance-based. This paper provides a theore...