Top Medtronic executives will see millions of dollars after agreeing to move their company headquarters overseas in what has become known as a "tax inversion" strategy, according to a Wall Street Journal report.
Orthopedic device industry giant Medtronic recently acquired Ireland-based Covidien and announced plans to move headquarters overseas to a lower-tax jurisdiction. Congress imposed a tax on companies moving headquarters overseas in 2004 to dissuade these types of transactions, but a new regulatory filing shows Medtronic will reimburse top executives with stock options and awards for the 15 percent tax.
According to the WSJ, the company will cover CEO Omar Ishrak's $24.8 million tax bill and Finance Chief Gary Ellis will split $32.7 million with other executives. Another $5.5 million will be shared among 10 non-employee board members
The executives must still pay capital-gains taxes on paper gains from their stock. A Medtronic shareholder filed a lawsuit to stop the acquisition earlier this summer, but the company and Mr. Ishrak maintain the acquisition and headquarter move will actually be good for shareholders and the United States economy. The company will still pay some taxes in the United States while experiencing a 2 percent decrease in the global income tax rate.
Mr. Ishrak says the company plans to invest in further research and development with their savings, including growth in the United States.