26 CEOs Who Made More Than Their Companies Paid In Federal Tax

A liberal-leaning think tank, the Institute for Policy Studies, yesterday released a 45-page study blasting the corporate tax code. The study describes how tax policy subsidizes exorbitant CEO pay at 26 big U.S. companies, including AT&T, Boeing and Citigroup, which paid their bosses more than they paid in federal income tax last year.

“Our nation’s tax code has become a powerful enabler of bloated CEO pay,” the study says.  It describes how deductions and credits allow companies to give bosses huge pay packages in order to cut tax bills, at a time when the government is running enormous deficits. That’s a controversial conclusion, but before I get into why, here are the 26 CEOs who made more than their companies paid in taxes last year. They took home average compensation worth $20.4 million, while their companies paid little or no federal tax on big profits, says the study.

1. Sanjay K. Jha, Motorola Mobility

2011 total compensation: $47.2 million

2011 federal income tax: 0

2. Clarence P. Cazalot, Jr., Marathon Oil

2011 total compensation: $29.9 million

2011 federal income tax: $442 million refund

3. John P. Daane, Altera

2011 total compensation: $29.6 million

2011 federal income tax: $22 million

4. Alan Mulally, Ford Motor

2011 total compensation: $29.5 million

2011 federal income tax: $4 million refund

5. Gregory Q. Brown, Motorola Solutions

2011 total compensation: $29.3 million

2011 federal income tax: $2 million

6. Ian Cumming, Leucadia National

2011 total compensation: $28 million

2011 federal income tax: 0

7. H. Lawrence Culp, Jr., Danaher

2011 total compensation: $21.7 million

2011 federal income tax: $6 million refund

8. Kirk S. Hachigian, Cooper Industries

2011 total compensation: $21.1 million

2011 federal income tax: $29 million refund

9. James T. Hackett, Anadarko Petroleum

2011 total compensation: $19.5 milllion

2011 federal income tax: $381 million refund

10. Miles D. White, Abbott Laboratories

2011 total compensation: $19 million

2011 federal income tax: $586 million refund

11. Michael B. Polk, Newell Rubbermaid

2011 total compensation: $18.9 million

2011 federal income tax: $37 million refund

12. Randall Stephenson, AT&T

2011 total compensation: $18.7 million

2011 federal income tax: $420 million refund

13. W. James McNerney, Boeing

2011 total compensation: $18.4 million

2011 federal income tax: $605 million refund

14. Aubrey McClendon, Chesapeake Energy

2011 total compensation: $17.9 million

2011 federal income tax: $13 million payment

15. Marc R. Benioff, Salesforce.com

2011 total compensation: $17.7 million

2011 federal income tax: $9 million

16. Edward D. Breen, Tyco International

2011 total compensation: $16.5 million

2011 federal income tax: $4 million refund

17. Scott A. McGregor, Broadcom

2011 total compensation: $16 million

2011 federal income tax: $605 million refund

18. David J. Lesar, Halliburton

2011 total compensation: $15.8 million

2011 federal income tax: $1 million refund

19. Jay S. Fishman, Travelers Companies

2011 total compensation: $15.8 million

2011 federal income tax: $176 million refund

20. Rory D. Read, Advanced Micro Devices

2011 total compensation: $15.6 million

2011 federal income tax: $3 million refund

21. Vikram Pandit, Citigroup

2011 total compensation: $14.9 million

2011 federal income tax: $144 million refund

22. Anthony D. Alexander, FirstEnergy

2011 total compensation: $14.4 million

2011 federal income tax: $0

23. Robert Duperreault, Marsh & McLennan

2011 total compensation: $14.3 million

2011 federal income tax: $7 million

24. Robert Benmosche, American International Group

2011 total compensation: $14 million

2011 federal income tax: $208 million refund

25. John V. Faraci, International Paper

2011 total compensation: $13.9 million

2011 federal income tax: $78 million refund

26. John Richels, Devon Energy

2011 total compensation: $13.9 million

2011 federal income tax: $143 million refund

“The low IRS bills these companies faced reflected tax avoidance pure and simple,” says the study.

One tactic: running profits through subsidiaries in offshore tax havens like the Cayman Islands and the Isle of Man. Together the 26 firms on the list operated 537 tax-haven subsidiaries last year, says the report.

The study also says the tax code allows companies to deduct “performance-based” compensation from their taxes, like many stock options. The top five beneficiaries of this loophole took a combined $232 million in performance-based deductions last year.

My former colleague Bernard Condon, who covered the story for the Associated Press, talked to people at several of the companies in the study, who claimed it tells a misleading story. They told the AP that they used tax deductions and credits to create jobs, do more research and development and bolster the economy.

As the AP explains, the study used companies’ estimated taxes, which they are required to disclose in public documents to investors. Final government tax filings are private and they can differ from the estimates. Another issue with the study is it doesn’t count taxes that companies have deferred to future years. But the study makes the point that deferred tax can be put off indefinitely.

One company reaction, as chronicled by the AP: Boeing, which said it did not get a net tax credit of $605 million, as the study says, but rather owed federal taxes of $1.3 billion, including deferred tax. A Boeing spokesman, Charles Bickers, said it used a tax credit to help hire 11,000 people in the U.S. last year. “We have put the R&D tax credit to exactly the use it was designed—creating U.S. jobs in a high-value, advanced technology industry,” Bickers said in a statement. But the Institute for Policy Studies said Boeing would have spent the money on R&D without the tax credits. Boeing paid its CEO James McNerney $18.4 million last year.

The study also points to accelerated depreciation on investments, which let a company take deductions for big purchases in a single year, as opposed to over several years, cutting taxes in the first year. The study said AT&T used accelerated depreciation to save $5.2 billion on its 2011 taxes. But Sarah Lubman, an AT&T spokeswoman, told the AP that the deduction helped AT&T make $20 billion in investments last year, helping “drive the economy and support good-paying jobs.” AT&T paid CEO Randall Stephenson $18.7 million in 2011.

Citigroup, which received a taxpayer bailout four years ago, paid its CEO, Vikram Pandit, $14.9 million in 2011, while claiming a $144 million federal income tax refund, says the study. A Citigroup spokeswoman told the AP that the company lost money in 2008 and 2009 and used those losses to offset taxes on profits this year.