Why and when do corporate executives transfer shares to charities or family foundations?

Executives donating appreciated shares of stock to charities or charitable family foundations are able to obtain a personal income tax deduction for the market value of the shares. This tax deduction benefit is greater when the shares have appreciated more. Donating appreciated shares to a charitable organization also nullifies the capital gains tax that would be due if the shares were sold.

Are there restrictions on when executives can make gifts? Gifts of stock are generally not constrained by U.S. insider trading laws. Company officers can then donate shares of stock to charities during periods when selling the shares would be prohibited.

When do executives make these donations? Are they strategic in timing? A preliminary study from NYU suggests that Chairmen and CEOs of public companies often make these gifts prior to sharp declines in their companies' stock prices. Foundations hold the donated stock for long periods rather than diversifying, permitting CEOs to continue voting the shares.