This excerpt taken from the HSY DEF 14A filed Mar 10, 2005.
Policy Regarding Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code provides that publicly-held companies may be limited in deducting from their taxable income certain compensation in excess of $1 million paid to the chief executive officer and the four other most highly-compensated officers. The Committee has considered the effect of Section 162(m) on the Companys executive compensation program in developing its policy with respect to the deductibility of the Companys executive compensation. It is the Committees position that in administering the performance-based portion of the Companys executive compensation program, it will attempt to satisfy the requirements for deductibility under Section 162(m). However, the Committee believes that it needs to retain the flexibility to exercise its judgment in assessing an executives performance and that the total compensation system for executive officers should be managed in accordance with the objectives outlined in the Executive Compensation Philosophy section of this report and in the best overall interests of the Companys stockholders. Should the requirements for deductibility under Section 162(m) conflict with the Executive Compensation Philosophy or with what the Committee believes to be in the best interests of the stockholders, the Committee will act in accordance with the Executive Compensation Philosophy and in the best interests of the stockholders, notwithstanding the effect of such action on deductibility for any given year. To minimize the loss of deductions for compensation paid, the Committee has adopted a policy that requires the executive officer to defer receipt of that portion of any non-deductible compensation that is capable of being deferred under the Companys Deferred Compensation Plan to the year in which such compensation would be deductible by the Company.