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Eurozone finance ministers attack golden handshakes

Eurozone finance ministers launched an attack on Tuesday against excessive golden handshakes, threatening to tax the large payments to senior executives when they leave a company.

“We believe that the excesses of captains of industries’ (pay packages) that we have seen in several countries ... are really quite scandalous and we are continuing to examine what can be done,” Luxembourg Premier and Finance Minister Jean-Claude Juncker told reporters after a meeting with his colleagues from the 15-nation euro zone. “We are currently examining fiscal instruments that might be brought into play that might combat these excesses,” he said, “....we would no longer accept a situation where in fiscal terms these golden handshakes would be tax deductible.”

Golden handshakes refer to significant severance package offered to high-ranking executives by major corporations when the executives loses his job due to firing, restructuring, or even scheduled retirement. It can be in the form of cash, equity and other benefits, and is often accompanied by an accelerated vesting of stock options.

The large payments have been criticized since there is no requirement that the executive perform well. In some high-profile cases, executives cashed in their stock options, while under their stewardship their companies lost millions of dollars and thousands of workers were laid off.

The Netherlands is introducing new rules to impose a 30% super tax on such pay packages above €500,000 ($775,000) and limit bonuses and stock options to 100% of pay. (people.com.cn)