Cardinal Health “just says no” to discrimination!
As footnoted regulars know, we think tax gross-ups are pretty gross. If you happen to get a huge chunk of change by exercising options or selling the company, you ought to be able to afford competent tax and legal advice to help minimize your tax burden. However, we had no idea that the lack of a gross-up was considered discrimination, at least in certain circles.
Yet, that’s exactly how Cardinal Health (CAH) explained its policy for providing gross-ups in the CD&A for the preliminary proxy it filed last night, claiming discrimination not just once, but twice:
The excise tax imposes discriminatory results between executives with varying compensation and stock option exercise histories; the gross-up provisions assure that the financial incentives provided by the employment agreements will have the desired effect upon the executive officers without discriminatory results
We’ll go out on a limb here, but we don’t expect the EEOC to take up this cause.
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September 18th, 2007 at 11:35 am
Isn’t it all a relative comparison? In that if the gross-up is not applied, or the gross-up is applied, everyone will feel a similar impact. Except in a situation whereby the timing of an executives personal decision to execute options creates a variable component within the compensation equation, within a particular period of time. So if the basis is consistently defined, the gross-up really represents nothing more than an added component of compensation, and a “discriminatory” basis never exists. Just another perfect example of those who “have” getting more, while those who don’t (think shareholders and employee slaves who don’t work in the executive suite) getting stuck paying the tab…….
September 18th, 2007 at 12:48 pm
This reminds me of the guard in The Shawshank Redemption complaining because he inherited $20,000.