Do businesses have unique obligations to the communities they serve, as well as to their employees?
Data from the Securities and Exchange Commission offer a rare snapshot of how, in low-wage industries, the rich get especially rich, at the expense of employees.
Co-published by Fast Company
Thanks to Dodd-Frank, companies are now required to publicly disclose their CEOs’ pay in comparison to their median employees’ salaries.
One night last year, as the public debate about economic inequality began to sharpen, California State Senator Mark DeSaulnier (D-Concord) was walking to the Berkeley premiere of a documentary film focused on that very subject. Inequality for All, narrated by former U.S. Labor Secretary Robert Reich, had been executive-produced by the man DeSaulnier was walking with that evening, Stephen M. Silberstein. At the time, DeSaulnier was casting about for ways to attack economic inequality and during their walk Silberstein, a software entrepreneur and philanthropist, mentioned an idea he’d been working on to help tackle the problem.
Until the 1980s, corporate CEOs were paid 30 times the amount the average worker received, but today, according to some conservative estimates, they make about 330 times that. What if, Silberstein proposed, state corporate taxes were tied to a company’s annual CEO compensation relative to its employees’ wages? DeSaulnier liked what he heard and so,
Meanwhile, the median wage continued to drop, adjusted for inflation.
What’s less well-known is that you and I and other taxpayers are subsidizing this sky-high executive compensation. That’s because corporations deduct it from their income taxes, causing the rest of us to pay more in taxes to make up the difference.
This tax subsidy to corporate executives from the rest of us ought to be one of the first tax expenditures to go, when and if congress turns to reforming the tax code.
We almost got there 20 years ago. When he was campaigning for the presidency, Bill Clinton promised that if elected he’d end the deductibility of executive pay in excess of $1 million.
Once in office, though, his economic advisers urged him to modify his pledge to allow corporations to deduct executive pay in excess of $1 million if the pay was linked to corporate performance – that is,