This Controversial Tax Benefit Means Warner Bros. Discovery CEO David Zaslav Could Score a Payday of Over $800 Million
Excise tax gross-ups have grown less popular over the years, but Paramount’s winning acquisition bid now includes one.
Pearl Meyer was cited in the Inc. article “This Controversial Tax Benefit Means Warner Bros. Discovery CEO David Zaslav Could Score a Payday of Over $800 Million”
A recent securities filing suggests that if everything lines up in Paramount’s acquisition of Warner Bros. Discovery, David Zaslav could make over $800 million, due in large part to a controversial contractual mechanism known as an excise tax gross-up.
The Wall Street Journal reports that the Warner Bros. CEO stands to make about $504 million if the deal closes this year, plus an additional $335 million from the tax gross-up if the company must reimburse a 20% federal tax levied on certain of the chief executive’s earnings—for a total of $839 million.
The article notes, “The executive compensation consultancy Pearl Meyer noted in a 2022 blog post that excise tax gross-up provisions are controversial among boards and have seen decreased use in change-in-control and severance plans since the 1990s. Nevertheless, the consultancy adds, companies will sometimes embrace them in the lead-up to an expected transaction.
A study of over 900 transaction disclosures by Pearl Meyer, for instance, identified 50 instances of companies adding at least one excise tax gross-up provision “shortly before the closing of a transaction.”
Learn more about this unusual tax benefit in the referenced piece, "A Fresh Look at the Much Debated “Last-Minute” Excise Tax Gross-Up", by Pearl Meyer Managing Directors Margaret H. Black and Daniel M. Wetzel.