All the talk of tax reform, to get a more progressive tax code, obscures the fact that income distribution on a pre-tax basis is already so unequal that no amount of taxation could possibly bring that into line. It’s true that the near-flat tax structure invites such pre-tax distribution, but we do very little in this country to stop the distribution itself. Dean Baker has several suggestions for curtailing pre-tax inequality. And clearly this is needed when you look at the rising salaries of our nation’s CEOs.
Despite a lot of noise from shareholders and a few victories at big names like Citigroup and Hewlett-Packard, executive pay just keeps climbing.
Yes, some corporate boards seem to be listening to shareholders, particularly on contentious issues like the seven-figure cash bonuses that helped define hyperwealth during the boom. Since the bust, corporate America on the whole has moved to tie executive pay more closely to long-term performance by skewing executive paychecks more toward restricted stock, which can’t be sold for years.
But rewards at the top are still rich — and getting richer. Now that 2011 proxy statements have been filed, the extent of executive pay last year has finally become clear. Median pay of the nation’s 200 top-paid C.E.O.’s was $14.5 million, according to a study conducted for The New York Times by Equilar, a compensation data firm based in Redwood City, Calif. The median pay raise among those C.E.O.’s was 5 percent. (The full list is available here.)
That 5 percent raise is smaller than last year’s. But it comes at a time of stubbornly high unemployment and declining wealth for many ordinary Americans. Even corporate pay experts say that this is hardly the kind of change that will quell anger over the nation’s have-a-lots by the have-lesses, particularly in an election year.
Judged by the standard of corporate profits, CEOs have had a pretty good year, and perhaps deserve all this income. Judged by the standard of a healthy economy, CEOs have failed to invest in people for four years running, and have not come up with anything to generate higher demand. Corporate boards look at the former, and never the big picture of the latter.
Pay packages now include a host of stock options, getting around some checks on oversized salaries (companies lose tax exemptions for certain excessive salary-based compensation packages). The stock options are taxed at the minute capital gains rate. This is how we get multi-millionaires with lower tax rates than their secretaries.
But though it does intersect with the tax code, pre-tax distribution is something to consider. Making sure workers and not just CEOs share in the gains of corporate treasuries is an imperative. Corporate governance has something to do with that, and this past year’s results show that “say on pay” is not enough.




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My question has always been: when they’ve destroyed the world and the lives of everyone in it (i.e., “won the game”) – what will they do with their piles of money?
We’re in the end stage of looter capitalism. They’re stealing everything that’s not nailed down.
But when demand dries up, the game is over.
Unless you cater to the new underclass, like Dollar General.
Right, Boeing?
i think most people are familiar with the scores of examples of what happens to countries when the wealth/income disparity reaches such cartoon evilish levels. hint: it’s not good. Examples abound. I wonder, though, could any champion of extreme disparity provide any type of example where this process does not lead to collapse and pain? bueller?
but, but… all those “savvy businessmen” deserve their obscene wealth and we are NOT to “begrudge” them their spoils. Didn’t you get the memo?
Really now, what IS wrong with everyone here???
Doncha know? Didnaya get the memo?
It’s all due to teh poorz & esp those horrid dastardly eeeevul illegals that we be having this-here “recession.”
Leave the 1% fabulous beings A-LOOOOONE! They are our saviors. Didnaya get the memo about those under-compensated working-their-fingers-to-the-bone fantastic & fabulous corp. CEOs is jus about to create lotsa jobs ‘n stuff????? Any second now… any second….
How does it affect anyone here if a CEO makes $2 million or $200 million a year? Nothing more than sour grapes and jealousy. If the shareholders are willing to pay that level of compensation to their chief executive then so be it. Certainly none of our business.
When some (or a lot) of taxpayer cash goes to propping up some of the same companies that pay their CEOs outlandish salaries I would argue that it is our business in those cases.
Sure. The U.S. government as a shareholder has the same shareholder rights as any other shareholder. If they don’t like the current compensation policies they cane work to have those changed as any other shareholder would.
and therein lies the rub. the taxpayers, who fund govt, aren’t exactly well represented by those in the govt who would have the potential to vote on such changes–which, if we remember, taxpayer $$ was handed over nearly without any strings attached. until then, what you call sour grapes is partially the honest reaction of a public that is watching taxpayer money go directly into the accounts of those that helped drive the economy in the ditch. if the taxpayers, who could be viewed as shareholders themselves in a just world (that will never exist), had the potential to vote as shareholders i would definitely assume that we would have more citigroup-like votes in ceo pay compensation. for now, we are expected to be quiet. not gonna happen.
How many of that list of 200 are still holding government money? My guess is not many.
I agree though. Its the government we need to be looking at here. Not the CEOs or corporations.
If a CEO is sending jobs overseas rather than pay living wages to U.S. workers, isn’t providing a decent retirement and healthcare package to employees, is cutting corners on controlling industrial waste or providing safe working conditions, is using the money to buy politicians or to buy up public assets and operate them for profit rather than for the public good, when an insurance company is sucking up 20-30% of premiums to pay for things like executive compensation while raising rates and denying coverage, if the CEO or the company isn’t paying taxes because of tax subsidies or tax shelters, then we all have an interest in the CEO’s salary.
A wealth and income disparity of third world proportions should be of concern to all of us.
and a valid point–those that were bailed out directly are not heavily represented in that list.
while dodd-frank was largely toothless, it does provide for the opportunity for SH to vote on exec comp, so i partly agree with you. if SHs are silly enough to believe the 90s hype about exec comp, and vote to retain such levels, so be it. i just wish there was some way to ensure that those that do are not protected by taxpayer bailouts if/when they become necessary.
Isn’t executive pay typically set by the board of directors, not shareholders? I thought the shareholder provision of D-F was non-binding, and I doubt if something like that exists in other corporations. Anyone have any documentation on that?
The Board sets the pay but shareholders vote for the Board. If they believe their best interests are not reflective of the Board’s decisions then they can vote for new Directors.
I think a valid argument can be made that overseas labor is a net benefit to U.S. consumers. The fact that some companies choose to use unskilled labor abroad rather than in the U.S. is driven by the desire to improve shareholder value and create greater efficiencies. If a U.S. firm is selling product to China and throughout Asia doesn’t it make more sense to have an on the ground facility rather than sending container ship after container ship. The world is a far smaller place in 2012 then it was in 1960. Globalization is here to stay and by in large serves as a tremendous benefit to the U.S. and its trading partners.
Thanks for the explanation about the pay. However, it doesn’t change what I said @11.
Even if the major individual and institutional shareholders who will impact that election benefit (or think they stand to benefit) from maintaining and increasing the wealth and income disparity of this country, we the people, shareholders or not in any particular company, have an interest in what is happening to our country as a result of it.
As far as your “net gain” theory, consumers don’t gain anything if they can’t buy stuff because they don’t have jobs. If you think an economic model based on greed (that’s what “maximizing shareholder value” at the expense of every other value means) and slave labor are a “tremendous benefit” you would perhaps enjoy living in one of those third world countries with whom we are competing for lowest place on the wealth disparity scale.
That’s true, but since the majority of shareholders happen to be in the 1%, it’s largely fallacious to suggest that the “average shareholder” can actually have much of an impact on CEO pay.
I’ve been a shareholder for many years, and I have sometimes been active in shareholder groups to put forward a variety of measures for shareholder votes, including reducing CEO salaries, etc.
Nearly 100% of the time, none of these measures get passed bc it’s what the fat-cats at the top want that get “voted” in… bc they hold the vast vast majority of shares. It’s not a system that lends itself to anything approaching “democracy,” and the smaller shareholder views are rarely, if ever, represented. Yet the 1% LOVE our money.
I’m afraid you are buying into the myth that there are net job losses as a result of globalization. That is just not the case. Jobs in the U.S. may shift industries but over an extended period of time the absolute number of jobs stays constant or even increases.
I also don’t understand your suggestion that shareholders should not be rewarded for their investment? Without then non of these services/goods would exist.
What is the issue here? If you don’t like the compensation being paid to a CEO of a stock you hold then why not just sell the stock? There doesn’t seem to be a better way to voice your differing opinion than that.
I think you may be buying into the myth that unemployment and slave labor are ok as long as they don’t effect you. I think you may also be buying into the myth that they don’t effect you.
CADreaming;
Job losses, due to globalization, is no myth, especially in manufacturing. Those losses have not been made up in other sectors of the economy. Your key phrase is: “over an extended period of time”. Many things can be smoothed out and made to look nice when viewed “over an extended period of time.”
As I said, jobs will move industries. All those jobs lost in manufacturing are being made up in the docks in the coastal cities as well as the growing number of importer jobs. The industries in which those jobs operate change, the number of jobs doesn’t. That doesn’t even take into account the items we manufacturer or services in the U.S. that are purchased by those overseas.
You would be hard pressed to find an economist that believes globalization has been a negative for society as a whole.
Slave labor? I think you have been duped by people trying to make arguments based on emotion rather than facts.
All those jobs lost in manufacturing are being made up in the docks in the coastal cities as well as the growing number of importer jobs. The industries in which those jobs operate change, the number of jobs doesn’t. That doesn’t even take into account the items we manufacturer or services in the U.S. that are purchased by those overseas
So, all this talk of reshoring manufacturing jobs is a waste, because, according to you, there no need to bring them back, those guys already found jobs..?
Show me your stats on this burgeoning dockworker trade you speak of.
CADreaming’
How does it affect anyone here if a CEO makes $2 million or $200 million a year? Nothing more than sour grapes and jealousy
Plain and simple: It is greed, one of the seven deadly sins. Money is every bit an addiction as cocaine and heroin. People used to know how much was “enough”; not anymore. With millions out of work; unless one lacks a conscience; one can see the problem here.
Who is to say what is enough? My enough I’m sure is different then your enough and your enough is i’m sure different from your neighbor’s. Maybe your hobbies are fishing and coaching little league. Others may enjoy working 100 hour weeks. Who are you to say that they have too much? Why would you want to punish them for their additional work? Greed? maybe, but so what. Some people’s passions are making money and there isn’t anything wrong with that.
The fact that you are upset because they may have a bigger house, a boat, a country club membership or god knows what else doesn’t change the decisions you have made to get where you are. Worry about your own life and don’t obsessed about what other people have.
http://www.bls.gov
And how many of those states where “the jobless rate is down” have seen the drop due to people giving up looking for work? If you have been following the monthly stats nationwide at all, you will have noted that the jobless rate has been falling even when the economy is not creating enough jobs to do more than break even (90k to 125k jobs needed every month to break even and accommodate new persons entering the work force)
But I’m sure you just ‘conveniently’ forgot that point…
I’m not jealous and not obsessing – just amazed at how greed has taken over this country and compassion has been thrown out the window. Forgive me for caring.
I’m looking at a 50 year chart. Not the last 6 months.
No, the U.S. government is the U.S. government. And if the U.S. government steps in to bail out a failing concern with our tax money, then the U.S. government damn well has the right and the duty to prevent said tax money from going to huge salaries and bonuses to the execs who couldn’t run the company without the U.S. government’s assistance.
Period.
….and in today’s news…