On tax inversions and relocation allowances

April 5, 2016

As most people know by now, the Treasury announced some pretty significant rules late yesterday meant to curb so-called tax inversion deals. And a short time ago, President Obama praised the move in a speech at the White House.

For us here at footnoted, that this new rule coincides with proxy season seems particularly interesting. That’s because a number of so-called tax inversion companies are disclosing hefty allowances for their top executives to live overseas in places like Ireland and Switzerland. Transocean Ltd., for example, which we highlighted a few weeks ago for its $10m footnote, spent over $1.6 million last year on housing allowances and related expenses for its top executives. For CEO Jeremy Thigpen, the total expense was $279,855, which included $90,722 in housing expenses and $136,693 in education expenses. A spokeswoman said that the company’s executive management team is based in Switzerland, though several executives, including Thigpen, seem to be pretty active on the Houston social circuit.

Of course, as this Bloomberg piece from 2014 noted, many executives are still based in the U.S. This chart — also from Bloomberg — tracks executives who run tax inversions, but continue to live in the U.S.

Stanley Black & Decker, another tax inversion poster child, had some interesting disclosures in its recent proxy as well. It paid executive John Wyatt nearly $400K in benefits last year, which included a $120K housing allowance and an unnamed amount in “reimbursement of incremental cost increases in tuition and boarding” for a minor child.

There’s plenty other examples of this sort of thing in the current crop of proxies that are coming out right now. It will be interesting to see what the appetite is for dealing with this.