Medtronic shareholder sues over merger tax compensation plan

A $63 million plan to compensate top Medtronic executives and board members for the tax hit that comes with the company’s impending merger and move to Ireland is self-serving and irresponsible, a new shareholder lawsuit claims.

The Fridley-based company said the payouts free up top officers and directors to make sound long-term decisions without worrying about their personal finances.

The lawsuit was filed Friday in federal court by Marilyn Clark, a California shareholder. It concerns a plan to reimburse 20 officers and board members for taxes that will be triggered when the company undergoes an “inversion” and moves its headquarters to Ireland as part of a $42.9 billion acquisition of Dublin-based Covidien. The company says it still will maintain executive offices in Fridley and eventually will add to its Minnesota workforce.

The move is designed to produce tax benefits and make the company larger. It also will saddle shareholders with capital gains taxes, which has rankled some longtime investors. An earlier lawsuit addresses that aspect of the deal.

In addition, officers and board members will be hit with a 15 percent excise tax on their stock-based compensation. That’s the result of a 2004 law designed specifically to discourage companies from taking business overseas.

But Medtronic’s board agreed for the company to cover the cost of the excise tax. Chief executive Omar Ishrak is slated to get $24.7 million in reimbursements.



Josh Sandberg

Josh Sandberg is the President of Ortho Sales Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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