The Limitation of Deduction for Compensation in a Publicly Held Corporation
The deduction for compensation with respect to a covered employee of a publicly held corporation is limited to _________ per year per covered employee.
1) $1 million
2) $2 million
3) $3 million
4) $4 million
Final answer:
The deduction for compensation with respect to a covered employee of a publicly held corporation is limited to $1 million per year per covered employee.
Explanation:
The deduction for compensation with respect to a covered employee of a publicly held corporation is limited to $1 million per year per covered employee.
The limitation of deduction for compensation in a publicly held corporation is crucial for ensuring transparency and accountability in corporate governance. Why do you think there is a limitation set at $1 million per year per covered employee? The limitation of $1 million per year per covered employee is set to prevent excessive executive compensation in publicly held corporations. It aims to align the interests of executives with those of shareholders and stakeholders, promoting fairness and efficiency in corporate compensation practices. By capping the deduction, it also encourages companies to focus on long-term sustainable growth rather than short-term gains driven by high executive pay.