Companies like eBay, Boeing and Verizon shell out more for CEO compensation than they do in federal income taxes, according to a study released Wednesday, as top executives at some of America's biggest businesses reap "awesomely lavish rewards for the tax dodging they have their corporations do.”
That’s the word from the Institute for Policy Studies, which looked at the federal income taxes paid by the S&P 500 companies with the 100 highest CEO salaries, and found that 25 of those corporations paid their chief executives more than they ponied up for Uncle Sam.
The most popular method for lessening – or eliminating completely – tax burdens is off-shoring corporate activity to havens in low or no-tax jurisdictions, the study finds, noting that 18 of the 25 in its study operate such offshore subsidiaries.
(For good measure, IPS notes that Bank of America and Citigroup, two of the biggest beneficiaries of federal bailout funds during the financial crisis, operate 115 and 427 tax-haven subsidiaries, respectively.)
In Pictures: Companies That Pay CEOs More Than Uncle Sam
While the figures in the IPS study are glaring – General Electric, for instance, paid CEO Jeff Immelt $15.2 million in 2010 and collected a $3.3 billion tax refund – it is worth noting that corporate America is simply playing by the ground rules as set forth. It seems a bit hopeful to expect corporations to stop using every option at their disposal to lessen their tax bill and conserve more cash for their own capital spending and to return to shareholders. After all, CEOs and boards are supposed to be running their business for the benefit of shareholders, not the U.S. government.
That is not to say that every CEO on the list is necessarily worth his paycheck either. As my colleague Scott DeCarlo points out, a number of the executives listed in the IPS report do not rank favorably on the Forbes' Bang For The Buck scorecard of compensation.
The IPS study may be most useful as a wake-up call to the loopholes in the U.S. tax code and the types of changes that lawmakers should be considering as they consider ways to raise revenue and decrease spending in order to shore up the federal deficit – a process that has been so contentious that even raising the Treasury’s borrowing limit was not enough to keep Standard & Poor’s from downgrading Uncle Sam’s AAA credit rating earlier this month.
In Pictures: Companies That Pay CEOs More Than Uncle Sam
Boeing, one of the companies cited by IPS, responds that the report is “simply wrong.” A spokesman says that Boeing paid $360 million in federal, state and local taxes in 2010, most of which was federal." (IPS put the figure at $13 million.) “The [IPS] report attempts to present the accounting value known as tax expense as the actual amount of federal income tax paid to the government by a company in a given year. In doing so, it misstates by a factor of more than 20 the amount of federal income tax Boeing paid in cash in 2010.”
EBay is equally critical of the IPS study, calling it "grossly inaccurate." A spokesman says eBay paid $646 million in taxes around the world in 2010, mosty in the U.S. and that "IPS has misrepresented our financial reports, and made no attempt to verify the facts with us before publishing inaccurate information.”
Bank of New York Mellon, one of the 25 companies cited on the IPS list, announced after the closing bell Wednesday that Chairman and Chief Executive Robert Kelly is stepping down over differences of opinion with the board of directors over the management of the company.