Not Just a Tax Issue: Lawsuits Crop Up over IRS 162(m)

By on January 26, 2012

by Andrew Liazos

Proxy season is now upon us, and a key task is to evaluate whether shareholder approval is needed for any executive compensation plan. One of the typical reasons to seek shareholder approval is to qualify for tax-deduction relief under Section 162(m) of the Internal Revenue Code. By and large, seeking shareholder approval for that purpose has been viewed as a relatively routine task. However, recent shareholder derivative lawsuits suggest that public companies should take a careful look at disclosures that solicit Section 162(m) shareholder approval. 

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