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We examine the impact of organized labor on the debt-like components of CEO compensation. In initial findings, we demonstrate a positive association between unionization intensity with measures of debt-like compensation intensity used in the extant literature. This finding is robust to alternative measures of union-bargaining strength and empirical approaches. Consistent with the view that managers substitute cash for accrued compensation to improve their bargaining position over labor, this result is robustly driven by the deferred component of debt-like compensation. Our results collectively suggest that unions play an important role in the use of deferred compensation. [ABSTRACT FROM AUTHOR]

Independent regulation commissions are, in the face of a judicial campaign against their independence, suffering from an internal ailment that is just as serious. These mainstays of the administrative state, including the Federal Trade Commission, National Labor Relations Board, and other important Regulators, are becoming one-person bands. Growing dominance by their chairs is occurring in tandem with a rash of associate commissioner resignations. We suspect these trends are related. The phenomenon of the disappearing associate commissioner threatens the very purpose of independent commissions. The tired has degraded commissioners' ability to marshal expertise, resist the political branches' influence, and deliberate as multimember bodies. This Article shows how chairs and chair-supervised staff have arrested control from other commissioners; how the White House, executive agencies, and Congress have encroached on commissions' turf; and how an increasingly partisan climate has turned deliberative discussions among commissioners into party-line votes. Leveraging data on 684 current and former commissioners on eleven key commissions, the Article then identifies associate commissioners' growing propensity to exit their positions early in their terms. These developments suggest that many of the perceived benefits of the independent commission form fail to be fully realized. Shorter tenures erode commissions' political insulation and collective experience and may degrade the quality of their deliberations and the signal value of dissents from commission daises. Whereas proponents of independent commissions vigorously defend the form against judicial challenges, they have failed to confront these developments that, as a functional matter, chip away at the purposes that independence is designed to serve. To address this oversight, we offer several prescriptions to reinvigorate commissions. Most notably, Congress should encourage associate commissioners to serve their full terms by granting them greater programmatic authority, agenda-setting power, and tiered or deferred compensation that rewards lengthy service. Through these and other changes, officials can help restore commissions to their previously exalted place in the administrative state. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This column summarizes and analyzes the material contained in the Nonqualified Deferred Compensation Audit Technique Guide (2021 Guide) recently published by the Internal Revenue Service. The column also highlights the changes made to the predecessor guide published in 2015 and provides information about what documents and other items an employer can expect to have examined by an auditor in connection with the audit of a nonqualified plan. However, care must be exercised in the use of the 2021 Guide. It fails to incorporate a full discussion of the many requirements of Section 409A. This is a significant flaw. [ABSTRACT FROM AUTHOR]

This study utilizes agency theory to examine how Chief Executive Officers' (CEOs) compensation contracts impact marketing strategy decisions within firms. Specifically, we examine whether variations in CEOs' inside-debt to equity ratio (i.e., ratio of pension and deferred compensation to equity holdings) impact the firm's strategic emphasis. Our findings indicate that CEOs with large proportion of inside-debt (i) tend to refrain from value appropriation through reduced advertising investments, and (ii) strategically emphasize firm resources towards the value appropriation process (advertising) as opposed to value creation (R&D). [ABSTRACT FROM AUTHOR]

Using a large sample of US firms for the period 2006–2015, we investigate the relationship between asset redeployability (AR) and a Chief Executive Officer's (CEO) inside debt holdings (CID) (pension benefits and deferred compensation). We find a positive association between AR and CID. In addition, we also find that this relationship is stronger in firms that are more financially constrained and during times of economic uncertainty. Collectively, these findings suggest that asset market frictions captured by AR are better determinants of liquidation value than asset tangibility. Our results are robust to an array of sensitivity/robustness tests and endogeneity concerns. [ABSTRACT FROM AUTHOR]

We develop a dynamic model where a principal contracts with an agent to operate a firm. The agent, protected by limited liability, trades privately a market portfolio to hedge market risk in his compensation. When liquidation cost of the firm is proportional to its size, the principal manages the termination risk by loading the contract with a positive market component, which alleviates termination risk in normal market conditions but makes termination more likely after negative market shocks. The optimal contract displays a dynamic mixture of absolute and relative performance evaluations and is implemented using a dynamic deferred compensation account. This paper was accepted by Agostino Capponi, finance. Funding: Y. Huang acknowledges financial support from the Shanghai Institute of International Finance and Economics and Fudan University [Gao Feng Project]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.4533. [ABSTRACT FROM AUTHOR]

This study extends our understanding of CEO inside debt compensation under an agency problem perspective by considering the impact of a behavioural trait, namely CEO overconfidence. Using a sample of US firms in Standard & Poor's ExecuComp for the period 2006–2019, we find that overconfident CEOs exhibit greater inside debt incentives (i.e. incentives arising from defined‐benefit pensions and deferred compensation). This relationship is more pronounced among firms with higher CEO overconfidence‐induced agency cost of debt (e.g. financially unconstrained firms) managed by CEOs who are less able to align compensation with their own preferences (e.g. less powerful CEOs). The results are robust to endogeneity, self‐selection concerns and alternative explanations. We contribute to the inside compensation literature that deals with agency problems under overconfident CEOs, and optimal contracting and managerial power theories. [ABSTRACT FROM AUTHOR]

How much do teachers value compensation deferred for retirement (CDR)? This question is important because the vast majority of public school teachers are covered by defined benefit pension plans that "backload" a large share of compensation to retirement relative to the compensation structure in the private sector, and there is scant evidence about whether pension structures are consistent with teacher preferences for current compensation versus CDR. This study examines a unique setting in Washington State, where teachers are enrolled in a hybrid pension system that has both defined benefit and defined contribution components. We exploit the fact that teachers have choices over their defined contribution rate to infer their revealed preferences for current versus CDR. We find that teachers on average contribute 7.23% of salary income toward retirement; 62% in fact elect to contribute more than the minimally required contribution of 5%. This suggests that teachers value CDR far more than suggested by prior evidence. [ABSTRACT FROM AUTHOR]

Split-dollar life insurance is enjoying a renewed interest from applicable tax-exempt organizations (ATEOs) because ATEOs must now pay a 21 percent excise tax on compensation paid to covered employees in excess of $1 million. This may not sound like something that would affect many tax-exempt organizations, yet because of the unique way covered employees must recognize deferred-compensation income, it has greatly increased the tax-exempt organizational motivation to find alternative reward programs for high earners. Split-dollar life insurance has been presented by many practitioners as a suitable alternative. [ABSTRACT FROM AUTHOR]

Does CEO tolerance to risk affect a firm's long-run sustainability? Using CEO insider debt holding, we show that CEO's risk-aversion encourages immoral yet rational decisions of emitting more greenhouse gas thereby adversely affecting the firm's long-run sustainability. Our result is robust to several endogeneity tests including a quasi-natural experiment. Our finding also suggest that to mitigate potential adverse reactions from stakeholders, carbon emitting firms with risk-averse CEOs tend to spend more on CSR activities. Much of the heterogeneity in our results are attributed to companies with weaker governance, powerful CEOs, and operating in a competitive product market. Overall, contrary to conventional wisdom, CEO preference toward risk-aversion can often lead to unethical outcomes (environmental degradation) and especially appears to be a key determinant for firm-level carbon emissions. [ABSTRACT FROM AUTHOR]

Theoretical studies suggest that, when determining the workplace safety level, CEOs face a trade-off between ex ante safety-improving expenditures and the expected losses due to ex post injury and illness occurrences. We examine whether firms with higher CEO inside debt holdings have safer workplaces. Using establishment-level employee workplace injury and illness data, we find that CEOs' inside debt holdings are negatively associated with employee workplace injury and illness cases. This relationship is more pronounced if workers' compensation premiums are more sensitive to injury claims and for firms with more government business and less pronounced for firms with higher levels of secured debt. We provide some evidence that our main result stems from CEOs increasing safety investments. Our empirical results are shown to be robust under a batch of robustness tests and when considering potential endogeneity problems. Our findings suggest that CEOs with higher levels of inside debt holdings are more sensitive to wealth loss due to employee injury and illness, leading to a safer workplace. [ABSTRACT FROM AUTHOR]

We document that firms can effectively retain executives by granting deferred equity pay. We show this by analyzing a unique regulatory change (FAS 123-R) that prompted 723 firms to suddenly eliminate stock option vesting periods. This allowed CEOs to keep 33% more options when departing the firm, and we find that voluntary CEO departure rates subsequently rose from 5% to 21%. Our identification strategy exploits FAS 123-R's almost-random timing, which was staggered by firms' fiscal year-ends. Firms that experienced departures suffered negative stock price reactions, and responded by increasing compensation for remaining and newly hired executives. Received June 6, 2016; editorial decision October 10, 2017 by Editor Andrew Karolyi. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

I study managerial short-termism in a dynamic model of project development with hidden effort and imperfect observability of quality. The manager can complete the project faster by reducing quality. To preempt this behavior, the prin cipal makes payments contingent on long-term outcomes. I analyze the dynamics of the optimal contract and its implications for the level of managerial turnover. I show that optimal contracts might be stationary and entail no termination. In general, I show that the principal reduces the manager’s temptation to behave myopically by reducing the likelihood of termination and deferring compensation. The model predicts a negative relation between the rate of managerial turnover and the use of deferred compensation that is consistent with evidence of managerial compensation contracts. Received May 23, 2016; editorial decision May 27, 2017 by Editor Francesca Cornelli. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between chief executive officer (CEO) inside debt holdings (pension benefits and deferred compensation) and use of supplier‐provided trade credit. We provide evidence that CEO inside debt holdings are negatively related to the use of trade credit. Our results are robust to the use of alternative regression estimation and alternative measures of key variables. We exploit the final enforcement of Section 409A of the Internal Revenue Code (IRC) as an exogenous shock to inside debt holdings. Our difference‐in‐difference regression analysis establishes a causal relationship. In addition, we provide evidence that our documented results are not driven by omitted variable bias. We also employ instrumental variable regression estimation using heteroskedasticity‐based instruments to mitigate the endogeneity concern. Our cross‐sectional analyses reveal that the relationship between CEO inside debt holdings and trade credit is more pronounced in firms with poor information environments and greater financing constraints. Overall, findings from our study suggest that CEO inside debt has important implications for the financing policy of the firm. [ABSTRACT FROM AUTHOR]

We find a strong positive association between the inside debt holdings (pension benefits and deferred compensation) of CEOs and announcement‐period abnormal returns (CARs) of acquiring firms bidding for private targets. In addition, gains to acquirers with high inside debt persist for at least 3 years post‐acquisition. Further analyses suggest that our results are largely driven by firms with lower levels of manager‐shareholder agency conflicts as proxied by higher transparency in firm activities, presence of a less powerful CEO, or presence of stronger monitoring. Our results are robust to an array of sensitivity tests. [ABSTRACT FROM AUTHOR]

A well-versed financial professional can provide an incredible service to clients seeking clear guidance on how to properly handle nonqualifed retirement benefits. Although mastery of the details may fall to the plan participant's administrator, attorney, or accountant, a competent working knowledge of the issues, concerns, and potential roadblocks will invariably assist clients in navigating through the seemingly irreconcilable differences presented by domestic orders. [ABSTRACT FROM AUTHOR]

After a 9-year wait, the IRS has finally issued proposed regulations under Section 457 of the Internal Revenue Code. These proposed regulations bring the current regulations up to date with respect to statutory changes made to Section 457 since 2003. More importantly, the proposed regulations provide new guidance under Section 457(f) so that it can be reconciled with the regulations finalized under Section 409A in 2007. Although the proposed regulations may appear to provide new design opportunities for tax-exempt employers, upon further analysis, the utility of these new design opportunities is somewhat limited. [ABSTRACT FROM AUTHOR]

Much has been made about the excitement around new features available in 457(f) plans, particularly compensation deferrals. Proposed regulations include some features that can create new opportunities for nonqualified deferred-compensation planning in the nonprofit sector. It will be important, when taking advantage of these features, to recognize the interplay between Section 457(f) and Section 409A. Certain features permitted under Section 457 might trigger unintended consequences if the plan is also subject to Section 409A. [ABSTRACT FROM AUTHOR]

Copyright of FinanzRundschau is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of FinanzRundschau is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The grant of stock rights to corporate employees and the grant of analogous forms of rights to employees of noncorporate employers that have elected to be taxed as partnerships continue to be very popular forms of executive compensation. Since many forms of stock rights or their equivalents, particularly when the grants are made at a discount, provide what is the financial equivalent of deferred compensation, the drafters of Internal Revenue Code Section (IRC Sec.) 409A included stock rights as potentially subject to the requirements of IRC Sec. 409A. However, in recognition of a historical tax status that predated the enactment of IRC Sec. 409A, that section does provide an exemption for certain forms of stock rights. These exempt stock rights must reflect certain required elements. Financial service professionals should be familiar with how each of these elements is applied so that they can determine whether a particular stock right fits, or can be made to fit, within the stock rights exemption. [ABSTRACT FROM AUTHOR]

One major financial decision a household faces is whether to use limited savings to prepay a mortgage or contribute to a tax-deferred retirement account (TDR), such as a 401(k) or an IRA. This paper mathematically models the tradeoff between these two saving methods using an expected utility constant relative risk aversion (CRRA) framework and then tests this model using data from the Survey of Consumer Finances (SCF). Advisors working with families to determine optimal saving strategies can use this model to help households decide whether to prepay a mortgage or contribute to a TDR. [ABSTRACT FROM AUTHOR]

Since the enactment of the Employee Retirement Income Security Act of 1974, church plans have been excluded from the requirements of that statute. However, the recent Third Circuit decision in Kaplan v. Saint Peter's Healthcare System has judicially narrowed the class of qualified retirement plans that qualify for this exclusion and this, in turn, potentially threatens the status of nonqualified deferred-compensation plans maintained by affiliated church agencies, such as hospitals and schools. The church plan litigation described in this column is still in its relatively early stages and it is too soon to determine who the winners and losers may be. Clients who are plan sponsors of church agency nonqualified deferred-compensation plans and clients who are participants in such plans, particularly those church plan clients who are located in the Third Circuit, should be advised of the implications of the Kaplan decision. Those church plan clients who are plan sponsors should begin to think about ways in which the risks associated with the Kaplan decision can be mitigated. Those church plan clients who are participants also should think about what, if any, action they may want to take in order to protect their benefits under the affected plans. [ABSTRACT FROM AUTHOR]

Under the "Rollover as Business Start-Ups" strategy an executive funds the purchase of a new business with tax-deferred funds and at the same time avoids the imposition of any taxes that typically apply to a retirement plan or IRA withdrawal. This column reviews the structure of the two forms of ROBS transactions and analyzes the tax and ERISA issues associated with the ROBS strategy in light of two Tax Court decisions as well as a recent federal appeals court decision. In addition, this column demonstrates why the ROBS strategy is not per se noncompliant with applicable tax law, but nevertheless warns that it is not a strategy for the faint of heart or for someone who is not equipped to pay close attention to details. Finally, in light of the recent negative case law, this column evaluates whether the ROBS strategy continues to be a viable mechanism for the investment of an executive's retirement funds and if so, what steps should be taken to avoid the form and operational defects to which the IRS pays most attention. [ABSTRACT FROM AUTHOR]

Copyright of FinanzRundschau is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We examine how executive pension and deferred compensation plans affect bank risk‐taking. We show that banks with more inside debt incentives are 5–6% less likely to approve risky mortgages. Using state individual tax rates as instruments, we show that the effect is likely to be causal. Further evidence shows that the effect comes mainly from executive pension plans. This result is robust and statistically significant after controlling for other potential reasons affecting mortgage origination and various fixed effects. [ABSTRACT FROM AUTHOR]

A study of after-tax 401(k) deferrals is evaluated through a comparative analysis of various retirement portfolio accumulation models. The hypothetical increase to a participant's after-tax retirement portfolio is presented as the basis of incremental value determination. Specifically, the potential use of after-tax 401(k) contributions during employment to create a Roth IRA conversion strategy at the time of separation is compared to a more traditional retirement savings strategy of solely utilizing pretax deferrals. Through the use of tax and growth rate assumptions, the potential incremental tax-adjusted value increase is evaluated on an annual basis. [ABSTRACT FROM AUTHOR]

or an employer who prior to the vesting of amounts deferred under a nonqualifed deferred-compensation plan discovers that the plan has an operational or form failure under Section 409A, there are three lessons that can be taken away from an IRS Chief Counsel Memorandum. First, the correction of a failure to comply with the requirements of Section 409A is not effective to correct that noncompliant deferred-compensation plan in time to escape the resulting adverse tax consequences to the employee to the extent that the deferred amounts become vested at or before the end of the taxable year in which the correction is made. Second, nothing in the Memorandum precludes the correction of a noncompliant nonqualifed deferred-compensation plan in a taxable year prior to the taxable year in which the deferred amounts vest. Third, to the extent that a noncompliant deferred-compensation plan contains vested amounts, whatever correction mechanism that may be available to the employer to undo the noncompliance is set forth in the correction procedures established in IRS Notices 2008-113 and 2010-6. [ABSTRACT FROM AUTHOR]

Workplace retirement plans (deferred compensation plans [DCs] and deferred benefit plans [DBs]) help workers save for retirement conveniently, consistently, and automatically. But the percentage of firms offering retirement accounts is steadily declining. Between 2001 to 2003 and 2010 to 2012, the retirement plan offer rate of firms dropped from 63 to 55%. The drop is driven by a decline in both DCs and DBs. Using a probit model and an Oaxaca-Blinder threefold decomposition technique applied to data from the Current Population Survey (CPS) for 2001 to 2003 and 2010 to 2012, and using longitudinal analysis of the Survey of Income and Program Participation (SIPP) 2008 panel waves 3 and 11, the authors find that the labor-contracting environment dominates individualand firm-level variables in explaining whether employers offer a retirement account to their workers. Therefore, attempts to raise retirement account offer rates must address the decline in workers' bargaining power and the changes in norms relating to provision of benefits. This study contributes to the important discussion about trends in DC and DB coverage and the decline in retirement security. [ABSTRACT FROM AUTHOR]

In an earlier column we examined the manner in which deferred compensation is subject to FICA taxes, including the special timing rule and the related nonduplication of wages rule. In that column we addressed in passing the possibility that employers could become liable for FICA taxes if the special timing rule was not adhered to. This observation was based on an unpublished 2013 decision in Davidson v. Henkel Corporation. The plaintiffs in that case recently won that litigation on a motion for summary judgement. This issue's column examines the Davidson decision in greater depth and determines how that decision may be applied to future litigation involving the application of FICA taxes to deferred compensation. It also analyzes what the implications of that decision will be for both the employers who maintain deferred-compensation plans and the employees who are participants, and addresses how the result in Davidson can be avoided through proper drafting. Finally, the column addresses whether the holding of Davidson can be extended to certain employer violations of Section 409A. [ABSTRACT FROM AUTHOR]

A little-known feature of the vast migrant labour system that supplied South Africa's gold-mining industry was the Deferred Pay Interest Fund. For much of the 20th century, a portion of the wages owed to African mine workers was deferred and remitted to them only at the end of their contracts. This is well-known, but what happened to the interest that accumulated on these deferred wages remains virtually unknown. Mine workers did not receive this interest; it was, instead, deposited into a fund controlled by the mining industry. This article examines the operations of this fund in the Transkei in the context of the crisis in the migrant labour system precipitated by newly independent states refusing to supply further migrant labour to South Africa. This prompted the Chamber of Mines to reorient labour recruitment towards the South African bantustans, and the Transkei quickly became the most important source of labour for the mines in the 1970s and 1980s. Although the fund had a mandate to spend on welfare projects in labour-sending regions, we argue that patterns of spending clearly show how it was used to support the reproduction of the migrant labour system. Payments were used as patronage for local elites, upon whom recruitment depended, and for distributing propaganda for the mining industry. In contrast, payments were consistently directed away from education for able-bodied students, because education would reduce the pool of unskilled labour on which the gold industry relied. Money that, arguably, rightfully belonged to mine workers from the Transkei was used to perpetuate their dependence upon migrant labour to the mines. [ABSTRACT FROM AUTHOR]

This study explores capital asset maintenance practices and challenges in U.S. counties, which have been understudied in previous public administration research. We also compare the current practices with those found in the 2001 Government Performance Project (GPP) analysis. Interviews with 20 officials in 12 counties revealed six themes. Four of these are concerned with maintenance challenges: the economic environment, politics, human resources, and information systems. The other two themes relate to efforts that have been made by these counties to enhance maintenance through cost management and additional funding. Overall, we found that asset maintenance in these counties was negatively affected by the Great Recession, and that there is still a substantial level of unfunded maintenance, which is only slightly better than what was reported in the GPP, despite a recent focus on improvements. [ABSTRACT FROM AUTHOR]