The Wonk Room

How American Workers Subsidize Excessive CEO Compensation»

Two weeks after the Government Accountability Office reported that “two-thirds of corporations operating in the United States did not pay taxes” between 1998 and 2008, The Institute for Policy Studies (IPS) released a new study revealing that the American tax payer is subsidizing “executive pay excess” to the tune of $20 billion a year.

In fact, “the more that corporations shell out for executive pay, the more they pocket in profit at the expense of average taxpayers.” Through a series of bureaucratic rules and loopholes, the federal government is transferring billions of dollars to the most privileged Americans:

Large increases in executive pay have had an inverse relationship to falling unionization rates — during the 1980s, as workers began losing their ability to check executive compensation by bargaining with employers for fair wages and benefits, CEO compensation steadily increased.

“Thirty years ago, chief executives averaged only 30 to 40 times the average American worker paycheck.” In 2007, top executives faced almost “no institutional challenge from their workers,” and earned “344 times the salary of the average American worker”:

As the report notes, to restore the balance of power in the workplace, lawmakers should pass the Employee Free Choice Act, “legislation that would help workers
realize their right to organize into unions and bargain collectively with their employers.”

Full disclosure: American Rights At Work is currently advertising for the Employee Free Choice Act on this site, though they had no role in any part of this post.

Norquist: McCain Can ‘Say Anything He Wants’ About CEO Pay ‘As Long As He’s Not Talking About Legislation’»

During an interview on the Fox Business Channel yesterday, right-wing anti-tax activist Grover Norquist revealed that John McCain’s promise to fight corporate greed is simply empty talk. Norquist essentially stated that McCain has embraced an all-rhetoric, do-nothing attitude with regard to executive compensation:

CAVUTO: So when he [McCain] talks about CEO salaries that are out of wack, that is one thing you think he should stay out of?

NORQUIST: Well first of all, it doesn’t do any harm, the president can say anything he wants, I guess…As long as he’s not talking about legislation, let him talk!

CAVUTO: Alright, so the windfall profit tax-type stuff that we see out of Democrats on the hill, you do not see him subscribing to that?

NORQUIST: No, and that’s a very big difference…You can complain about something, but when you ask the government to come in…that’s slightly different.

In a separate interview on CNN’s Glenn Beck Show, Norquist told guest host Michael Smerconish that McCain’s tax plan is a greater version of the Bush tax cuts. “[McCain] has recognized and stated that [Bush’s] tax cuts are what turned the economy around, that they’re necessary to keep the economy growing and that he wants them continued. He’s gone beyond that, to call for full expensing for business investment, taking the corporate rate from 35% down to 25%… ”

Watch it:

Norquist hasn’t always been McCain’s biggest fan. In 2005, he called McCain was a “tax-increasing Bolshevik.” But now that McCain has outsourced his economic agenda to Grover Norquist, Norquist is singing a different tune.

Where Does McCain Stand On Executive Compensation?»

Our guest blogger is Sam Davis, Policy Analyst at the Center for American Progress Action Fund.

This past Saturday, Sen. John McCain (R-AZ) told reporters: “I think it’s unconscionable when the guy who apparently is the head of Countrywide and his co-conspirators make huge amounts of money while Americans are facing the threat of losing their own homes.”

This sounds surprising, but we’ve heard it before. In 2002, President Bush assailed CEOs who “collect huge bonus packages when the value of their company dramatically declines,” promising to give shareholders the leverage they need to ensure greater accountability over a company’s board. More than five years later, the same thing is happening again.

If Senator McCain wants to get serious about the “unconscionable” rise in CEO pay at failing companies, there’s plenty he could do that would bring fairness and accountability back into the executive compensation system — even measures as simple as requiring that public companies submit executive pay plans to a nonbinding shareholder vote.

Reporters should ask Senator McCain what he thinks of that idea.

– Sam Davis

UPDATE: Again, if Senator McCain truly finds it “unconscionable” and “outrageous” that CEOs cash out with millions while shareholders, consumers and employees lose out, and believes shareholders and directors should punish these CEOs, what does he think of his own top economic adviser, Carly Fiorina, and how should she be reprimanded?

The former chief executive of Hewlett-Packard, Fiorina presided over the first layoffs in the 50-year history of the company during her tenure, an imperious drive to acquire Compaq Computer that was ultimately deemed a “lemon,” a 50% drop in the company’s stock, and the layoff of over 20,000 workers. Unconscionably and outrageously taking home $180 million in total compensation and a $21.1 million severance package.