One-fifth of U.S. CEOs get tax perks - study

By Martha Graybow

NEW YORK, April 1 (Reuters) - One-fifth of U.S. chief executives get help from their companies in paying their income tax bills, a new study from corporate governance research firm The Corporate Library has found.

The report, released on Tuesday, found that 657 out of 3,297 large U.S. companies tracked by the governance group helped pay some portion of their CEOs' tax obligations. The study was based on pay data in regulatory filings in the 12-month period that ended in February.

Companies typically provide so-called tax "gross-ups" to executives to help cover tax penalties on perquisites such as airplane use for personal travel, housing, gifts, financial planning and country club dues. Some CEOs also get reimbursed for taxes on bonuses or restricted stock awards.

The tax help is a little-known executive perk that must be disclosed in annual proxy filings to shareholders. Study author Paul Hodgson questioned why investors must help foot these bills.

"That the prevalence of tax gross-ups for CEOs -- despite the increased scrutiny arising from the introduction of more detailed disclosure compensation requirements -- comes as something of a surprise," wrote study author Paul Hodgson, a senior research associate at The Corporate Library. "It shows that boards or CEOs, or both, are more thick-skinned than we took them to be."

When CEOs get the tax reimbursements, those payments themselves are taxed. To compensate for that, companies then "gross up" the tax payments to an even higher level so that the executives do not have additional tax liabilities, Hodgson said.

This is the first study on tax reimbursements by The Corporate Library under new regulatory disclosure rules on executive pay, so no comparative figures for prior years are available, Hodgson said.

According to the study, the highest amount paid as a tax gross-up in the 12-month period was for R. Chad Dreier, CEO of home builder Ryland Group Inc (RYL.N).

In fiscal 2006, Dreier received $5.82 million worth of tax assistance, a year when his total compensation was almost $49 million, the Corporate Library said in the report. The bulk of that -- $5.75 million -- was for the vesting of $6.5 million of restricted stock, according to the study.

A Ryland spokeswoman had no immediate comment on the report.

Overall, most of the tax payments awarded to CEOs were small compared with CEOs' total compensation, with 75 percent of the reimbursements amounting to less than $35,000, according to the study.

"Yet, as a whole, the total of all the payments made by the companies in the study amounted to almost $42 million of shareholders' money being used to satisfy income tax obligations generated in the main by providing executive-level perquisites to CEOs," Hodgson wrote. "What corporate purpose are such payments serving?" (Editing by Gerald E. McCormick)