Goal setting and performance measures - by tax professionals in Fortune 500 companies

Tax Executive, The, Nov, 1998 by Barry P. Arlinghaus

Table XIX
Measures That Directly Affect Senior Tax Person Compensation

Goal                                                     Number

Cash savings on specified projects                         47
Staying within department budget                           37
Measurable tax project objectives                          36
Quality of tax savings ideas                               33
Targeted worldwide effective tax rate                      32
Lack of surprises                                          29
Minimize audit adjustments                                 27
Contr. to before-tax earnings (non-income tax savings)     22
Targeted effective federal income tax rate                 12
Effectively manage use of consultants                      11
Targeted effective state or provincial income tax rate      8
Targeted effective foreign income tax rate                  7
Minimize turnover of tax personnel                          6
Minimize time spent by consultants                          6
Targeted state and local tax as a percent of
 before-income-tax profit                                   3

Tax executives were also asked who has input into the evaluation of the senior tax person at their company. One hundred and eighty-four responded. Forty indicated that only the CFO has input. Two identified the Treasurer. Most of the others responded that it is some combination of two or more individuals. Eighteen responded that both the CEO and the CFO have input. Eight indicated that the CEO, the CFO, and the company's business units have input into the process. Another eight identified the CFO and a tax partner from the company's auditing firm. There were a number of other combinations where two or more have input. Table XX shows which individuals have some input into the evaluation of the senior tax person.

Table XX
Input Into the Review of the Senior Tax Person

Persons With Input                      Number

Chief Financial Officer                  169
Company's Business Units                  61
Chief Executive Officer                   60
Treasurer                                 60
Tax Partner From Company's Audit Firm     43
Vice President of Legal Affairs           28
Controller                                11
Others                                    32

Others included in the process are the audit committee of the board of directors, peers, professional tax staff, vice president of corporate development, chief accounting officer, corporate secretary, outside tax counsel, and the IRS case manager.

Professional Tax Staff Goals and Performance Measures

Eighty-five of 184 respondents indicated that either the senior tax person or a functional manager, if delegated, establishes a formal work plan for each professional in the tax department. As shown in Table XXI, it appears that firms organized along functional lines or a combination of functional lines and type of tax are more apt to establish formal work plans than those organized by type of tax or along lines similar to the corporate organization.