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Sunday, July 10, 2011

Is the plan really to cut medicare while CEO's salaries skyrocket?

From The San Fransico Chronicle

by David Sirota

We've long known that executive pay has skyrocketed during the last 40 years - and especially during the past 20. As the Economic Policy Institute has reported, the average CEO makes roughly 300 times the average worker - up from 100 times the average in the early 1990s and 40 times the average in the 1970s. This is nothing new - in fact, it's lately been a bragging point for firms in their efforts to attract talent.

So, then, why is corporate America suddenly so shy about compensation rates?

This is the question after a recent Washington Post report on big corporations lobbying against a new regulation compelling them "to report the median annual total compensation for workers and the annual total compensation for the chief executive, and to report the ratio of the two." Companies, of course, were already obligated to publish CEO pay rates - the new provision just asks them to publish the same information about the average worker on a company-by-company basis.

The fact that this modest provision has prompted such an aggressive opposition campaign suggests business leaders fear something. Do they fear that revelations of huge pay gaps will alienate socially conscious customers? Or is it a fear of something more? I'd say the latter.

First and foremost, it's likely CEOs are afraid these ratios, if published, will fuel intensifying shareholder activism against exorbitant executive pay.

Second, CEOs don't want these ratios being published because of how they might affect the larger debate over corporate tax reform.

Remember, as the deficit has exploded, incriminating facts have leaked out showing that many corporations pay more to their executives than they pay in taxes (and many firms pay no corporate income tax at all). Remember, too, that an easy solution to this problem is to base corporate tax rates on a company's pay gap.

How would this work? One of the most innovative ideas is to replace the loophole-ridden corporate tax system with a flat rate that is then multiplied by the CEO-to-worker pay ratio. This would create a tax incentive for salary fairness, while also allowing corporations to choose their own tax rate. If a company wants a low tax bill, it can shrink the chasm between what it pays its suits and what it pays its rank-and-file workers. If, by contrast, a company likes high tax rates, it can maintain a big pay gap. But as the executive class well knows, without the median worker pay data, this kind of reform cannot happen - and so they want to prevent the data from getting out.

These are just some of the ways new compensation information could be applied. But no matter how it is used, the point remains: Since We the People chartered these corporations, we have every right to know more about their salary structure. Doing so will give us the information we need to make sure the middle class once again benefits from our economy.

That may not serve the interests of CEOs, but it is in the best interest of America.

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