Why Hedge Funds Don’t Worry About Carried Interest Tax Rules [DealBook]
Vic Fleischer writes that hedge fund managers have plenty of tax tricks up their sleeves: "[M]any top hedge fund managers have entered the business of reinsurance, using Bermuda-based reinsurance companies as a capital base for investment in their hedge funds. Insurance companies must hold capital in reserve, and there is nothing to stop an insurance company from holding a huge reserve and investing that capital in a hedge fund. By stapling a small reinsurance business onto billions of dollars of hedge fund capital, any profits can be indefinitely deferred from tax offshore."
Accounting for Earnings Manipulation [MB/WSJ]
Paying executives with stock-based comp was supposed to discourage them from earnings managment. "[A] forthcoming paper in Contemporary Accounting Research by Yongtae Kim, Haidan Li and Siqi Li of Santa Clara University suggests accounting firms think the risk is real. Examining a large sample of firms, the three found that the more sensitive CEOs’ wealth was to volatility in their companies’ stock, the more accounting firms tended to charge for audits."
Doubling Down on C.E.O. Pay [DealBook]
The Chipotle co-CEOs didn't make as much as Larry Ellison, but they do alright for themselves: "Chipotle paid its founder and co-chief executive, Steve Ells, $25.1 million in cash and stock last year. It paid Montgomery F. Moran, the company’s other co-chief executive, $24.4 million. Those figures put the men, college buddies who are now running the country’s hottest fast-food chain, near the top of the charts for executive paydays."
Carl Levin has had it up to his reading glasses with these inversions: "Sen. Carl Levin (D-Mich.) said that he would introduce legislation as soon as Thursday to make it harder for companies to buy foreign businesses to lower their tax bills. Levin told reporters that he would push legislation despite claims from Republicans that the only way to battle inversions, in which companies shift their legal address by merging with foreign outfits, is through tax reform." And he's not buying that "tax reform" excuse, either: "The trouble is tax reform has been the mantra for doing nothing for a long, long time," Levin said. "Tax reform, instead of a way to get things done, has been an impediment."
If weeding out unhappy employees is the goal, sure, why not?