Simple Executive Salary Fix
by RichardFlatts, Fri Oct 16, 2009 at 07:20:14 AM EDT
I have had this idea for addressing the outrageous executive salaries that we have seen explode recent years kicking around in my head and thought I would lay it out here and see if anyone thought it was a good idea.
In short I propose something of a luxury tax - on companies, not individuals - who take home extremely high amounts of compensation.
It would go like this.
First, it would be limited to publically traded companies with 500 employees or more. So any claim of hurting small business or entrepreneurs would go out the window. This would primarily impact Wall St., the big banks, the oil companies, big pharma, etc.
At these companies that qualify you would average the salaries of all employees except the executives and board members. Then take that average and multiply it by 40. So at a company with an average salary of 60,000 the magic number would be 2,400,000.
From there any company paying an employee more than $2,400,000 would be taxed at 70% on every dollars worth of compensation over. When it doubles, at $4,800,000, the company would taxed at every dollar over the 4.8 at 95%.
I place the tax on the company not on the individual for a few reasons:
1) Americans like the idea of making a lot of money, even if they themselves don't and they would in my opinion, view a tax on the individual as punative, where they may not view it as such if it is placed on a large, faceless corporation.
2) Being that it would be paid by the corporation it would get the shareholders attention. They would focus on a $15,000,000 compensation package long and hard.
3) Execs would be forced to explain the salaries in conjunction with their usual talking points about "doing what is best for shareholders" and "protecting the bottomline". Would a luxury tax be best for shareholders or help the bottomline?
Would this end massive payouts? No. At companies with billions in profits they would suck it up and pay the tax ... and more power to them if they are making money and can afford such payouts. But it would focus everyone on the issue.
It would bring to light what the average workers are making and maybe even give execs a small incentive to boost the average. It would also focus shareholders and board members on whether the CEO, or Exec VP, or whomever, is reeeally worth a 10 or 15 or 20 million dollar tax. I bet at companies showing losses the answer would finally be "no" they are not.