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CEO Pay in the New Gilded Age

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Where are the pitchforks?

Growth in median compensation may have slowed lately, or even fallen for some of the highest-paid chief executives. But this is little recompense for workers who have seen their wages stagnate or fall for decades.

Last year, the average chief executive of an S&P 500 company was paid 335 times more than the average nonsupervisory worker, according to the AFL-CIO’s useful interactive site, Executive Paywatch.

This stunning disparity has been the norm since the 1990s, but it wasn’t always this way. In 1965, the average CEO made 20 times the pay of the average worker; it was around 34-to-1 in 1980. By 1998, it was nearly 322-to-1.

What to do about it is fairly obvious. Tax the living heck out of them:

One measure would be returning to the progressive taxation system that operated from the 1940s until 1981, with a top marginal rate of, say, 70 percent as opposed to today’s 39.6 percent.

Another is to eliminate the tax-option loophole, which helps subsidize high compensation. (It allows companies to deduct the market value of the options, even though they are not a real expense, thus lowering their taxes. This arguably encourages companies to grant even more options in big comp packages.) According to a report from Citizens for Tax Justice, 315 big companies have used this to avoid $64.6 billion in taxes over the past five years.

Corporate tax rates could be set higher for firms with high CEO-to-worker pay differentials. Say-on-pay could be made mandatory rather than advisory. Public companies could be required to separate the chairman and chief-executive jobs. And unionization could be made easier, giving workers greater bargaining power.

Unionization certainly does need to be made easier, although I’m not sure that it would really make a difference unless unions start bargaining over peak executive pay. I’d love that, but it seems that tax, tax, tax is the answer, in a variety of ways. Time to reclaim that money for the public good.

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