Inequality.org

A project of the
Institute for Policy Studies

CEO Pay Reform Scorecard

An updated scorecard from the Institute for Policy Studies rates recent CEO pay reforms, as well as other reforms pending in Congress and a few promising initiatives not yet on the congressional table.
es2016
The Institute for Policy Studies’ 2016 Executive Pay Reform Scorecard – part of the latest edition of the IPS annual Executive Excess Report – evaluates an extensive list of creative and practical proposals for reining in excessive executive compensation.

Principles for a Better CEO Pay System

The 2016 Executive Pay Reform Scorecard covers proposals that have been either introduced in the U.S. Congress or enacted into law in recent years, as well as other promising reform approaches either proposed or put into place elsewhere in the world. We have based our pay reform rating system in this scorecard on the following five principles that advance economic fairness and stability in executive pay policy and practice.

1.  Encourage narrower CEO-worker pay gaps.

Extreme pay gaps — situations where top executives regularly take home hundreds of times more in compensation than average employees — run counter to basic principles of fairness while endangering enterprise effectiveness. Management guru Peter Drucker believed that the ratio of pay between worker and executive can run no higher than 20-to-1 without damaging company morale and productivity. Researchers have documented that Information-Age enterprises operate more effectively when they tap into — and reward — the creative contributions of employees at all levels.

2.  Eliminate taxpayer subsidies for excessive executive pay.

Ordinary taxpayers should not have to foot the bill for excessive executive compensation. And yet they do. Government contracts and subsidies routinely make mega millionaires out of corporate executives. And all chief executives benefit from a tax provision that lets corporations deduct unlimited amounts from their income taxes for the expense of executive pay.

3.  Encourage reasonable limits on total compensation.

The greater the annual reward an executive can receive, the greater the temptation to make reckless decisions that generate short-term earnings at the expense of long-term corporate health. Government policies can encourage more reasonable compensation levels without micromanaging pay levels at individual firms.

4.  Bolster accountability to shareholders.

On paper, the corporate boards that determine executive pay must answer to shareholders. Recent reforms have made some progress toward forcing corporate boards to justify to shareholders the compensation they award to executives.

5.  Extend accountability to broader stakeholder groups.

Executive pay practices, as the 2008 financial crisis vividly demonstrated, impact far more people than shareholders. Effective pay reforms need to encourage management decisions that take into account the interests of all corporate stakeholders, including the consumers, employees, and communities where corporations operate.

In the 2016 Executive Pay Reform Scorecard, IPS grades each reform by assigning a rating for each of these five principles.

 

  • Politically CorrectTx

    The very root of everything on this website is completely wrong. So much so that the US Treasury dept actually had to publish a report about the misinterpretation of income data with regard to the middle class and INCOME MOBILITY. I know it kills a good leftist narrative, but the US treasury traced a sampling of US Taxpayers for a decade and guess what…..the people in the top 1% change every year….57% of the people in the top 1% income earnings at the beginning were no longer in it at the end. Close to 60% of the lowest income quintile had moved up to higher income….. 2990 of the top 4000 income earners were only in the top 1% for a single year. By the definition of the top 1%….it is a graph of the highest income earners every year….Bill Gates one year….Warren Buffet the next, Joe Smith who sells his business after 50 years is the 1% for a single year……..people who are watching their life savings evaporate in a stock market crash sell everything (like in 2008-2009) having to recognize a lifetime of capital gains all in one year.
    We have the greatest income mobility in this nation and the biggest bunch of leftist whiners trying to screw things up for their own political gains.

    and guess what…..the owners of the company pay the exec salaries….its up to them to decide who is worth what…….a lot of people can be a bank teller….far fewer people bring the skill and confidence to make pension fund investors want to have the guy as a bank president when they are putting their pensioners life savings at risk..

    https://www.stlouisfed.org/Publications/Inside-The-Vault/Spring-2010/US-Income-Inequality-Its-Not-So-Bad

    • Julie

      The Fed is correct, you shouldn’t use Census data, you should use tax data.

      High-Income Tax Returns for 2013:
      For 2013, there were slightly more than 5.6 million individual income
      tax returns with an income of $200,000 or more, accounting for 3.8
      percent of all returns for the year. Of these, 12,794 returns had no
      income tax liability, a 4.9-percent decline from the number of returns
      with no income tax liability for 2012, and the fourth decrease in a row
      since reaching an all-time high of 19,551 returns for 2009.

      Individual Noncash Contributions, 2013:
      For Tax Year 2013, individual taxpayers who itemized deductions
      reported a total of $51.6 billion in noncash charitable contributions on
      a total of 22.2 million returns. About a third (7.7 million) of these
      returns reported $46.4 billion in charitable contribution deductions
      using Form 8283, Noncash Charitable Contributions. Individual taxpayers
      use this form when the amount of taxpayer deductions for all noncash
      donations on Schedule A, Itemized Deductions, exceeds $500.

      Individual Income Tax Shares, 2013:
      For Tax Year 2013, taxpayers filed 138.3 million individual income tax
      returns, excluding returns filed by dependents. The average adjusted
      gross income (AGI) reported on these returns was $65,314, down from
      $66,444 for the previous year. Total AGI decreased 0.1 percent to $9.03
      trillion, while total income tax increased 4.0 percent to $1.23
      trillion. For 2013, the adjusted gross income threshold for the top 50
      percent of all individual income tax returns was $36,841 for the year.
      These taxpayers accounted for 88.5 percent of total AGI and paid 97.2
      percent of total income tax. The top 0.001 percent of tax returns had an
      AGI of $45,097,112 or more. These taxpayers accounted for 1.9 percent
      of total AGI, and paid 3.3 percent of total income tax. The average tax
      rate of 13.64 percent for all returns in 2013 was the highest of this
      10-year study.

      Corporate Foreign Tax Credit, Tax Year 2012:
      For Tax Year 2012, corporations reported over $109.6 billion in foreign
      tax credits, which is almost identical to the amount claimed in 2011.
      Foreign source taxable income from corporations claiming the foreign tax
      credit decreased 1.6 percent from 2011, to $420 billion for 2012, while
      their current foreign taxes paid increased 21.3 percent, to $49.3
      billion. Firms in the manufacturing industry accounted for almost
      three-fifths of the foreign source taxable income. Together, the
      Netherlands, the United Kingdom, Canada, and Japan were responsible for
      28.7 percent of the foreign source taxable income.

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