Wednesday, October 21, 2015

Everyone's Favorite Bogeyman

CEO pay is making the news, not for the usual criticism, but in a historical perspective. In an article purporting that Clinton-omics made Carly Fiorina's career, it deals with the tax law changes that created more performance based pay for executives. Since the law caps the allowable deductions for actual pay to CEO's, it allowed performance pay, commonly in the form of stock options, to be deducted from corporate income as an expense. (Expenses reduces net income, which reduces tax liability. If corporations had to pay mega-millions from their payroll, but they couldn't count them as expenses, the cash would leave the corporate bank accounts and they'd have to pay taxes on that amount because that money would still look like profit.)

CEO pay has increased nearly 250% faster than the lowest organizational tier pay in the past two decades. In the mid-nineties, CEO average pay was 10,000% higher than average worker pay; now it's 30,000% (ratio of 303 to 1).

As discussed in a previous blog of mine, I hope they're adding value that's worth it.

I've made the offer before to corporate boards: hey, instead of paying John or Jane Doe $20 million/year, I'll do the job for $2 million and I'll probably create as much stockholder value as they would. What a bargain! Now that's value!!

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