Executive Compensation Alert: Action Required for 2010 162(m) Performance Pay



Section 162(m) of the Internal Revenue Code (the “Code”) denies a tax deduction to a public company if compensation paid to certain individuals (known as “covered employees”) exceeds one million dollars for the taxable year. However, compensation that is “performance-based” within the meaning of Code Section 162(m) is deductable by the public company for tax purposes. A “covered employee” is defined as a public company’s Chief Executive Officer and its three other most highly compensated officers (excluding the CFO) whose compensation is required by the SEC to be disclosed for a given year.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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