So What Happened to That Talk About Reining in CEO Pay?

By Chuck Collins and Sam Pizzigati, AlterNet. Posted June 25, 2009.

Four years later, Mr. Eisner took home even more. He cashed out a stash of stock options and cleared $565 million, the "biggest payday for an executive in history," The Washington Post exclaimed.

These days, that $565 million payday almost seems ordinary. In 2007, the financial world's top 50 hedge fund managers averaged $581 million each.

We need to end, and soon, this endless escalation of what our power suits get to stuff in their pockets. We simply can't afford to continue down the economic road we've been traveling.

Outrageously huge rewards, the economic meltdown of the past year has made perfectly plain, have no redeeming social value. They serve only to create incentives for outrageous behavior. We need to start discouraging that behavior - and we can. The best place to start: the federal tax code.

Right now, our tax code actually encourages excessive executive pay. The more companies shell out in executive bonuses and stock awards, for instance, the more they can deduct off their taxes.

Consider, for instance, Lockheed Martin, a company that feeds almost exclusively off government contracts. Lockheed recently announced that its CEO took home $26.5 million in 2008. Under current law, almost all of that $26.5 million qualifies as a tax deduction for the company.

One member of Congress, Rep. Barbara Lee from California, is moving to end taxpayer subsidies for excessive executive pay. Ms. Lee has introduced legislation, the Income Equity Act, which denies corporations tax deductions on any executive compensation that runs over $500,000 or 25 times the pay of a company's lowest-wage worker.

Enacting this legislation, says Ms. Lee, "would discourage skyrocketing pay at the top and encourage companies to raise the pay of workers at the bottom."

That pay at the bottom desperately needs raising. Average Americans today, after adjusting for inflation, are making less in weekly wages than they made back in the 1970s.

And that's no accident. For three decades now, America's corporate aristocrats have "performed" - and pocketed personal fortunes - by attacking the well-being of average Americans. Over those years, they've downsized workers and outsourced jobs. They've gutted pensions and benefits. They've hollowed out our middle class.

We need to start heading in a different direction. And quick.

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Chuck Collins is a senior scholar at the Institute for Policy Studies in its Boston office, where he directs the Program on Inequality and the Common Good. Sam Pizzigati, an Institute associate fellow who lives in Kensington, edits "Too Much," an online weekly on excess and inequality. They are co-authors of "Executive Excess," a yearly report on CEO pay. This column originally appeared in the Baltimore Sun and is reprinted here with the permission of the authors.

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