Judgment call – Supporting your executive compensation decisions

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Abstract: During the past few years, shareholders, government agencies and the general public have closely scrutinized how public companies compensate their executives. However, as this article discusses, a recent court case reaffirms a board’s discretion when it comes to compensation decisions and provides valuable guidance on protecting those decisions against shareholder challenges. A sidebar notes that, while Internal Revenue Code (IRC) Section 162 limits a public company’s deduction for top executives’ compensation to $1 million per year, Sec. 162(m) provides an exception for qualified performance-based compensation.