Iowa Senator Chuck Grassley says he’s on a quest to prevent another Enron-style scandal from stealing the retirement nest eggs of corporate workers. Grassley’s chairing a hearing of the Senate Finance Committee today (Wednesday) that’s looking into how corporate executives are finding ways to reward themselves by skirting the federal tax on compensation that is not performance-based.
Grassley says “There’s been a big upswing in stock options to compensate corporate executives and thus, at least it seems to me, to get around the tax.” He says the most well-publicized of these shady methods is what’s called the “back-dating” of stock options.
Grassley says “Most recently, we’ve seen reports of extensive back-dating of stock options where executives wait until after the fact to pick a date for their stock options then pick the low point of the stock during the year to maximize their profits.” He says the tax code governs certain aspects of executive compensation and imposes a tax unless the pay is more than a-million dollars and is performance-based compensation.
Grassley says some executives are finding their way around that with the back-dating. Grassley says “It’s the ultimate in Monday morning quarterbacking and it’s nothing less than senior executives ripping off shareholders and rank-and-file employees in order to enrich themselves.” Also, today University of Iowa finance professor Erik Lie is testifying before a different panel, the Senate Banking Committee, on the issue of back-dating stock options.