Executives want generous pay but don't want immediate tax bills from salaries or cash bonuses.
Instead, they elect to set aside a portion of their pay into a deferred compensation plan. Such plans allow the compensation, plus earnings, to grow tax-deferred, potentially for decades. Starbucks (SBUX) Chief Executive Officer Howard Schultz had about $88 million in his plan as of the end of 2010, Securities and Exchange Commission filings show. Verizon's (VZ) CEO, Ivan G. Seidenberg, had $62 million. Richard B. Handler, CEO of Jefferies Group, had $225 million. It's their money, they just haven't paid taxes on it yet.
Executives Who Do It
• Starbucks CEO Howard Schultz
• Verizon CEO Ivan G. Seidenberg
Next: The Exit Strategy (Not CPA-Recommended)