Time to Confront CEO Pay Scandal

by James Parks, Sep 2, 2008

It’s no surprise that 77 percent of the public says CEOs “earn too much,” according to a 2007 Financial Times/Harris poll, especially when you consider that about a week after US Airways began charging passengers $2 for water, the airline announced it was giving its top seven executives more than $5.3 million in stock options. Or that a new report shows tax and accounting loopholes for top executives and corporations cost taxpayers $20 billion a year. And that sentiment has likely intensified in 2008, says Sarah Anderson, with one banker after another walking away from the mortgage mess with overflowing pockets.

When that many voters agree on something, you can be sure the politicians take notice. Writing on AlterNet, Anderson says voters need to push the politicians to turn those words into actions. Anderson is co-author of the report Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay, released this week by the Institute for Policy Studies and United for a Fair Economy.

Of the two presidential candidates, Barack Obama has taken a strong stand against excessive CEO pay. He introduced the Shareholder Vote on Executive Compensation Act, which would give shareholders the chance to signal their displeasure with executive pay through a nonbinding vote. He says excessive CEO pay goes against the American value of being paid well when you do a good job. Speaking at an Indianapolis press conference in May, he said:

If you’re successful, you should be rewarded. But if you’re a Wall Street CEO today, it doesn’t seem to matter whether you’re doing a good job or a bad job for your shareholders and workers: You’ll be rewarded either way. When (John McCain) has had the chance to do something about this problem, he’s opted for continuing the do-nothing approach of the Bush years.

Obama also is supporting a fix for so-called “carried interest,” a tax loophole that allows buyout kings—like Kohlberg Kravis Robers & Co.’s (KKR’s) Henry Kravis, whose personal net worth is $5.5 billion—to pay a lower tax rate than their secretaries.

Says Anderson:

When financial royalty like Kravis don’t pay their fair share, the rest of us common taxpayers get stuck with the bill. And that’s just one of numerous tax loopholes that shift the financial burden for our country’s infrastructure, education and other needs from the ultrarich to the middle class.

The biggest barrier to real reform, Anderson says, is the money Kravis and other big earners have used to dispatch “armies of lobbyists to Capitol Hill.”

So far, their “Save Our Subsidies” campaign is working. The five key bills to plug executive-friendly tax loopholes are all languishing. In part, this may be due to the fact that members of Congress know they would face an almost certain presidential veto. In 2009, with a new face in the White House, prospects for this legislation could change.

If the candidates are serious about change, they should vow to plug every single loophole that allows our tax dollars to flow into the pockets of top business leaders. Surely, in these troubled economic times, we can find better ways to spend our nation’s wealth.

Click here to read Anderson’s full post and here for our report on the tax loophole study.

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