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Google Execs Happy With $1 Salaries
DarkClown writes "ZDNet is on the one hand reporting that Google execs will keep their $1 salaries again this year, and on the other hand is reporting that the executives cashed in more than $160 million worth of stock last month." From the stock article: "Since the search giant went public in August 2004, Brin has sold about 6.5 million shares at a market value of $1.68 billion. Page has sold about 5.8 million shares at a market value of $1.4 billion, according to calculations from Thomson Financial. Chief Executive Eric Schmidt, who was brought in to run the company before it went public, has sold more than 2.1 million shares, worth more than $502 million." They could be getting a multi-million dollar salary *and* the stock money. Good faith efforts go a long way in my book.
But can we really say it's some amazing piece of good faith that they settled ONLY for 1.4 billion dollars in salary for the year?
In addition to the billions they are making from their stock, their $1 salaries also allow them to qualify for food stamps. Just another perk...
Unknown host pong.
I believe that Capital Gains Tax is higher than Income Tax (at least from personal experience). I'd be willing to believe "Good Faith" based on that.
"Oh my God. This is terrible. This is the end of my Presidency. I'm fucked."; ~ Donald J. Trump
So, do they divy their one dollar up into bimonthly pay checks?
In this case, the Google founders and executives are cashing in on their IPO. It's not really the same as the typical salary to stock option crap that's going around. Let's face it, if you could get paid via capital gains (15% tax rate, until it's not taxed at all...) instead of salary (38% tax rate), why would you want a salary?
Make dividends and true stock investments (investing in IPOs, new stock offerings, and startup stock payments) taxable at the capital gains rate and revert all the daytrading/recycled stock profits to the full tax rate; it will benefit new technologies and put the brakes on silly speculation trading (read: gambling for the rich).
Let us live so that when we come to die, even the undertaker will be sorry -- Mark Twain
Or to be more truthful-- another day another 0.0027378507871321013004791238877481 cents
Sadly this is not the way it has worked in practice.
Executives are granted options that are already in the money on issue. Thus, they get substantial income even if the stock does nothing. If the stock goes down these options are regularly repriced with lower exercise prices which effectively removes all the downside risk.
Furthermore, options are a poor tool. The link should be between the executives performance and outcomes, not the stock price. The stock price will move for many reasons unrelated to the executive's performance - for example, stocks go up in booms and yet you would be hard pressed to argue that any executive was responsible for the economic boom. Thus, at a minimum, they should only be paid when their stock outperforms other similar stocks (or even just the whole market index). Instead, you see executives being rewarded heavily for good luck. If the market is going up, only the most grossly incompetent executive could make a stock go down. A mere seat-warmer is still likely to get significant returns.
The basic economics is that poorly designed incentive schemes, of which option grants are an example, encourage gaming of the system and not proper results or rewards.
Ask yourself what the various levels of government have done to earn a quarter of the wealth spawned by Google.
On top of all the standard responses (cops, roads, an army, etc), they built the Internet, without which Google couldn't exist.
It isn't about tax evasion or good faith
You're right. Technically, the term is tax avoidance : Tax evasion is illegal. Tax avoidance is making money while paying the smallest legal amount of tax on that money.
Stock (dividend income) sales are taxed at a much lower rate than Regular Income. They were one of the tax cuts passed by Bush back in '02 (?). Prior to that, your tax rate on stock sales was whatever your Ordinary Income rate was (seems fair, right? The more you earn, the more you're taxed). What Bush did was scrap that, and said that so long as the stock was from a US company or certain multinationals, your tax rate was capped at 15%.
When people talk about 'tax cuts for the rich', the dividend income tax change was the biggie.
In the case of The Google Boys, it's the difference between paying a base 35% on $1.4Bn in Income, or paying a base 15% on $1.4Bn. That's over $200 million dollars less in tax.
-EvilMagnus
These guys started at the bottom of the pile, right? Just like the great majority of us, they were workers. Then they had a great idea, and now years later, they're billionaires because of it. It's the american dream. Why does everyone assume that just because they've made money they've turned to the dark side? 99% of you put in the same position wouldn't be turning down the billion dollars from stock sales. You'd have earned it fair and square, and you'd be very happy with yourself. I'm happy for them too, they've created probably -the- most useful tool on the internet, IMHO. Dave
Specialization is for insects. -Heinlein