SPECIAL REPORT: EXECUTIVE PAY : Clearing the bar

Last year, Congress reacted to public furor over runaway executive pay by passing a law limiting the business expense deduction for companies that pay executives more that $1 million in “non-performance’-based” compensation. That means if executives at your company earn more than $1 million in salary, the amount exceeding $1 million isn’t deductible as a business expense. But if the top dog gets a $5-million bonus based on clearing some performance hurdle, the whole $5-million is tax-deductible. The law hasn’t caused salaries to fall, compensation consultants say, but it has caused many companies to set very low performance goals.