Citizens' Issues
Bringing Sciences Together
Only a unified concept of science (organised curiosity with logical scepticism) can help us understand this universe (multi-verse)
 
“The saddest aspect of life right now is that science gathers knowledge faster than society gathers wisdom.” — Isaac Asimov
 
Science is trying to understand this universe with the means available, using our five senses. Over the years, sciences were divided into natural sciences, social sciences, political and economic sciences and, of course, human sciences, etc, thanks to Rene Descartes’ reductionism. Progress in many fields was stunted due to this caste system. There is the forward caste of natural sciences and the backward and untouchables in other fields. For example, social sciences were treated as second-class science. 
 
Most of the Western natural sciences are dying a natural death, with the advent of quantum physics and the acceptance of consciousness into science from the realm of philosophy. The original Greek root of the word science is philosophia. This has brought forth a new dimension to science—what is called biocentrism—the origin of all human (and animal) thought and behaviour is centred on our perception of this world. Everything depends on our consciousness. Each of us has individual worldview (biocentrism). 
 
It was beautifully put by Max Planck who said that “there is no perception without a perceiver.” He also emphasised that the whole world is but consciousness and all matter is derived from there. This automatically puts social and all other human-related sciences into the same basket as natural sciences. The latter is undergoing a sea change after the advent of quantum physics. Biology is fast changing into systems biology and the new evolutionary biology. Human physiology needs a drastic change to keep man alive on this planet and so do other natural sciences. This, therefore, is the ideal time for a change of heart among those that want to understand this universe (multi-verse). Only a unified concept of science (organised curiosity with logical scepticism) can accomplish this, as the conventional natural sciences can only grasp as much as their five senses let them. Now, we are able to comprehend much more than what we grasp with our five senses.
 
How Do We Do It?
Any change is resisted by the status quoists. They have their vested interests in keeping the system the way it is, since reductionism in science feeds the greedy business of drugs, instruments, chemicals for fertilisers and what have you. The so-called conventional natural scientists and their paymasters will not let this happen. For the common good of the common man, sciences will have to come together which will make all the ills of single systems fade away. There are few independent thinking people in this world that will stick their neck out for their principles to save mankind and go after the reality. One small example will do. We have been spending lakhs of crores of rupees for the moon mission, etc, while we have the highest number of malnourished children (47 million) who do not get enough money to feed them; they are dying daily of nutritional immune deficiency syndrome (NIDS). We let them die!
 
In case we had all the sciences come together, and if we have humane managers of funds, one would certainly think that keeping dying children alive has greater priority than going to the moon. The latter can certainly wait. Another humane scientist might think of researching to make man tranquil here to be able to land in his neighbour’s house with a smile on his face. That would be a greater advancement—to bring man and man together—than landing on the barren moon. One can go on and on giving more evidence to say that ending the caste system in science will benefit mankind. Science satisfies our curiosity to know how this world works. But one gets only a keyhole view of the world. While reductionist science is destructive, holistic sciences will help build bridges of love between man and man.

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Remember That CEO Pay Cap? It’s Even Less Effective Than We Knew

Companies are increasingly using pay-for-performance to get around a $1 million federal limit on tax deductions for executive compensation

 

Tim Cook got almost $400 million of restricted stock when he was named Apple chief executive in 2011, succeeding Steve Jobs. Regardless of whether Apple shareholders fared well or badly over the grant's 10-year term, all Cook needed to do to collect that stock (worth about $700 million at today's price) was keep his job. It was the kind of deal that pay mavens derisivelycall "pay for pulse."

 

But two years later, Apple and Cook retroactively changed the terms of his grant, making about 40 percent of it "pay for performance" based on how Apple shares do relative to those of other companies in the Standard & Poor's 500-stock index. Apple quoted Cook as saying he wanted to align his interests with those of regular shareholders.

 

What Apple didn't say then 2014 and now says only in passing 2014 is that the change also gave the company a chance to get more than $200 million in tax deductions. Under Cook's initial deal, Apple, which declined to comment, would have received no deductions because a 1993 tax law would have barred it from treating Cook's grant as an operating expense.

 

By my estimate, revising the grant has generated $58 million in tax deductions so far for Apple, which would get $168 million more over the next six years if Cook receives the rest of his performance-based stock at today's price. In return for agreeing to revise his deal, Cook has been collecting some restricted shares each year rather than having to wait until this Augustfor the first half of his grant and until 2021 for the balance.

 

The Apple change is an example of how U.S. companies, in the process of making shareholders happy by putting executives' compensation at risk, have also managed to make an end-run around the 1993 law that was supposed to limit federal tax deductions on top officers' compensation to $1 million a year per executive.

 

As Cook's modified deal shows, those pay-deductibility limits are even more porous than we at The Washington Post and ProPublica realized three weeks ago, when we wrote that the deduction cap had failed to put the brakes on executive pay.

 

Under that 1993 law, "performance-based" compensation isn't subject to the $1 million limit. The law, pushed by President Bill Clinton during his first term, initially covered five "named executive officers" at companies with publicly traded stock. Now, it covers four NEOs per company. (Chief financial officers were excluded in 2007).

 

Since we last visited the topic, we've learned more about how company compensation trends have changed, particularly in recent years. We had calculated, based on expert advice, that while executive compensation overall continued to skyrocket, the portion subject to the deduction cap had outpaced the pay-for-performance component. In fact, it turns out that the reverse is true. We learned this by hiring compensation data provider Equilar to tease out the details from proxy statements of 40 big companies, including Apple.

 

Those firms are the members of the "Nifty Fifty" club 2014 the 50 S&P 500 companies with the greatest stock market value 2014 that also disclosed executive compensation for 1992, the year before the limits on deductibility took effect.

 

Then, average total compensation per executive at the 40 companies was $2.1 million. In 2014, it had jumped to $12.7 million.

 

Along with aggressively boosting compensation, these companies have moved aggressively to pay-for-performance 2014 so much so that 76 percent of the total compensation in 2014 was tax-deductible. That's far more than if 1992 patterns had held.

 

The most striking number involves salaries, the only one of today's pay categories that is totally subject to the deductibility limit. Salaries shrank from 23 percent of compensation in 1992 to a mere 8.8 percent in 2014. The biggest growth area: performance-based restricted stock, which made up 40.5 percent of 2014 compensation. Restricted stock made up only 9.7 percent of compensation in 1992, and little of it was performance-based.

 

"The trend has been to make restricted shares pay-for-performance instead of just vesting over time," said Dan Marcec, Equilar's director of content. He said 83 percent of restricted share grants to chief executives of S&P 500 companies are now based partly or entirely on performance, up from 58 percent in 2010.

 

Bonuses have also shifted substantially into the pay-for-performance category, Equilar's numbers show. Bonuses made up 21.4 percent of executive compensation at the companies we reviewed in 2014, and 93 percent of that was performance-based.

 

What's driving this shift? Tax deductions are a factor but not the single factor.

 

"There has been a lot of scrutiny and pressure from investors and from the say-on-pay rules that are part of Dodd-Frank," Marcec said. That's the financial-reform legislation that was passed after the 2008 financial crisis and that requires, among other things, that public companies offer shareholders a nonbinding vote at least once every three years on top execs' pay packages.

 

Shareholders have been overwhelmingly receptive to "say on pay" proposals. According to a Conference Board study, 91 percent of the shares voted last year approved "say on pay." Only about 1.5 percent of the firms in the Conference Board's database 2014 44 of the Russell 3000 companies 2014 failed to get support from a majority of the voting shares.

 

There is another development pushing performance-based compensation. The Securities and Exchange Commission will soon require companies to disclose the relationship between executive pay and companies' performance. "This has been a major factor," said Matteo Tonello, a Conference Board managing director.

 

The shift to performance-based compensation has greatly reduced whatever effect the 1993 deductibility limit may have had.

 

Some senators have called for the law to be amended to end pay-for-performance deductions. So has Hillary Clinton, who 2014 ironically 2014 is proposing to close a big loophole in one of her husband's signature pieces of legislation.

 

There are no comprehensive numbers on what proportion of named executive officers' compensation is tax-deductible. Steven Balsam, a professor at Temple University's Fox School of Business, took a swing at the subject four years ago. In an oft-cited paper, "Taxes and Executive Compensation," written for the Economic Policy Institute, he analyzed compensation paid by 7,248 companies in 2010.

 

However, to simplify things, Balsam counted all restricted stock and bonuses as subject to the deduction cap; we followed his method in our original analysis.

 

When I revisited the subject with him recently, Balsam told me that he couldn't possibly do a detailed, company-by-company study of more than 7,000 firms. "There was no way to deal with it," he said. "Even if you look company by company, it's not clear what is deductible and what isn't."

 

In annual proxy statements, companies are required to provide a compensation summary and discussion, but the level of disclosure can vary greatly. And proxies generally note only that a company intends to comply with the deductibility rule, not whether it does.

 

Balsam's explanation: "Even if companies think that they are making their grants deductible, that may not be the case. Companies have to jump through all sorts of hoops. The tax code is incredibly complex."

 

Which brings us back to the one restricted stock grant we decided to examine closely 2014 Apple chief executive Cook's.

 

One of the more interesting aspects of Cook's revised deal is that it has no upside for him.

If Apple's total return 2014 stock price increases or decreases, plus reinvested dividends 2014 is in the top third of companies in the S&P 500, Cook gets all that year's performance-based shares. If Apple is in the middle third, he gets half of them. If it's in the lowest third, he forfeits them.

Even if Apple produces extraordinary results, Cook won't get more performance-based shares than his original grant gave him.

 

According to Apple filings, Cook forfeited stock then worth about $1.7 million in 2013, the first year his grant modification took effect.

 

However, Cook has already received about 2.2 million shares as the result of the modification, rather than having to wait until Aug. 24 of this year to get any stock at all. The cash dividends 2014 currently $2.08 a share annually 2014 on those shares exceed the $1.7 million value of the shares he forfeited. Under terms of his grant, as I read it, he doesn't collect any dividends on unvested shares.

 

Companies, especially big companies, have been moving increasingly to performance-based compensation in an era in which they want to keep "say on pay" voters on their side. They also have to worry about so-called activist investors.

 

But there's a fringe benefit. While loudly proclaiming their devotion to shareholder value, the companies can quietly take tax deductions that would not be available under "pay for pulse" compensation practices. It's yet another example of corporate synergy 2014 and tax avoidance 2014 at work.

 

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.

 

 

 

 

 

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COMMENTS

vswami

9 months ago

Feedback (academically speaking; for deliberation with likeminded approach):
“Regardless of whether Apple shareholders fared well or badly over the grant's 10-year term, all Cook needed to do to collect that stock (worth about $700 million at today's price) was keep his job. IT WAS THE KIND OF DEAL THAT PAY MAVENS DERISIVELY CALL "PAY FOR PULSE." (FONT supplied)
The faulted practice is, as read and understood, concerns the restriction on tax deductibility of so called ‘executive pay’. Impliedly, therefore, that has no application to non-executive pay. If so, the purport or import, particularly of the implications, or correctness or otherwise, of pay mavens’ likening it to “PAY FOR PULSE” is not clearly understood, rather confusing. To know what means, - may read through:
http://www.eremedia.com/tlnt/the-problem...

Incidentally, there is one inevitable inference that is noted to surface: Globally, all such restrictions enacted solely for augmenting Revenue , with no social purpose to be effectively accomplished in the ultimate analysis, more often than not unfairly so, lead to and result in ‘tax avoidance’ ; though not tax evasion, despite the line of demarcation being too thin to be identified even with assistance from the top-notch Astronmer Royal.

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