Something seems to be in the air these days — besides coronavirus. A hopefulness. A boldness. A conviction that we now have a real opportunity for blunting the corporate power that’s done so much to make the United States the world’s most unequal wealthy nation.
How can we seize that opportunity? New reports from two veteran national advocacy groups — Public Citizen and Oxfam America — are offering up a gameplan.
Public Citizen released its “blueprint for reform” last week on the tenth anniversary of the Dodd-Frank Act, the 2010 legislation that tried to clean out the corporate and financial rot that birthed the Great Recession. That attempt came up short. But the effort, the new Public Citizen analysis by Bart Naylor shows, has left us with a jumping-off point for a much more rigorous assault on corporate greed.
Oxfam has gone back decades further in America’s corporate reform history, back to the excess profits taxes levied during the 20th century’s two world wars. Those taxes didn’t just raise substantial new revenue. They helped check corporate power and empower workers — and could have that impact once again, Oxfam argues, if reconfigured for our 21st century’s war on the coronavirus.
Globally, that virus is so far more than holding its own. But the biggest winners so far in our pandemic era may well be America’s biggest corporations. The nation’s 25 largest corporate concerns, Oxfam details, are averaging 11 percent profit margins for the 2020 fiscal year, this at a time when small U.S. firms have seen their quarterly earnings drop by as much as 85 percent.
Many of Corporate America’s top 25 have far surpassed that average 11 percent gain. The credit card giant Visa is looking at a 52 percent profit margin for fiscal 2020, with Microsoft, Pfizer, and Intel all reporting annual 2020 profit rates of 30 percent or more. The 17 most profitable of the top 25 are together grabbing over $85 billion more in 2020 profits than they averaged the previous four years.
Average American workers, meanwhile, have taken quite a corona wallop. One in five have lost hours and wages to layoffs and furloughs.
This striking contrast between worker insecurity and burgeoning corporate bottom-lines, Public Citizen points out, represents nothing new. America’s economic rewards have been concentrating “at the top” since the 1980s.
“The induced coma of the pandemic,” adds Public Citizen’s Bart Naylor, “has ripped the scar off this economic wound, requiring massive aid to newly displaced workers who have no savings to fund more than a few weeks of basic expenses.”
We won’t see any real recovery from our corona wounding, the new Public Citizen analysis explains, until the nation starts seriously addressing the ongoing reality of excessive corporate executive compensation. Outrageously high rewards are continuing to give top execs an incentive to behave outrageously — to their workers, customers, and communities — on everything from job safety to the cost of prescription drugs.
The new Public Citizen report advances a variety of politically plausible corporate pay reforms. The most imaginative — and impactful — of these proposals spin off a Dodd-Frank Act provision that didn’t get too much attention at the legislation’s original enactment a decade ago. This provision — a mandate that requires publicly traded corporations to annually disclose the ratio between their CEO and typical worker compensation — only went into full effect three years ago.
What makes this provision so important? Back in the 1960s, big-time CEOs nationally averaged about 20 times the pay of average American workers. Over recent years, major corporate CEOs have been collecting pay that runs over 300 times the pay of average workers. Before Dodd-Frank’s disclosure mandate, we couldn’t drill down from these national executive-worker pay ratio figures to the individual enterprise level. Now we can. Last year, for instance, an Institute for Policy Studies report used Dodd-Frank disclosure data to identify 50 U.S. CEOs who took home in 2018 over 1,000 times the pay of their company’s most typical workers.
The AFL-CIO, in its just-released annual CEO pay study, has found that another 20 CEOs took home over 1,000 times their worker pay in 2019 and then turned around and furloughed over half their workers when the pandemic hit in 2020.
The time has come, Public Citizen argues, to place consequences on unconscionably wide executive-worker pay ratios.
One example: The original Dodd-Frank legislation requires corporations to hold advisory shareholder votes on top executive pay packages. But corporate boards can ignore these votes. The Public Citizen proposal: Don’t just make these votes binding. Instead, if shareholders reject an executive’s pay deal, pay for that executive “should revert to 20 times the median pay at the company.”
Congress could apply the same ratio leverage to share buybacks, the financialization maneuver that artificially boosts corporate share prices — and the executive pay that links to these prices. Legislation already before Congress, notes Public Citizen, would prohibit share buybacks where CEO pay exceeds 150 times median worker pay.
Congress could also apply pay-ratio consequences to government procurement, as lawmakers in Rhode Island have proposed. Federal lawmakers, urges Public Citizen, “should ban contracts to corporations with extreme gaps or give preferential treatment to firms with narrow gaps.”
Federal subsidies could carry the same pay-ratio strings. In fact, during the deliberations this past March on what became the CARES Act for coronavirus assistance, a House of Representatives Financial Services Committee draft “capped CEO pay at aided firms to 50 times the median pay at the firm.”
That notion never advanced into the final CARES Act text. But the Congress elected this November could next year include a progressive contingent strong enough to insist on adding a ratio rider to every piece of proposed corporate subsidy — or tax — legislation. The basic principle: no tax dollars or tax breaks for companies that pay their top execs over 50 times what their most typical workers earn
Oxfam America’s newly released corporate reform report zeroes in on those moments of crisis — like the current pandemic — that corporate power so relentlessly endeavors to exploit. Generations ago, Americans had an answer for blatant corporate greed grabs: the excess profits tax.
During the World War I and then again World War II eras, Congress legislated stiff taxes on corporate profits that ran above the pre-war norm. These taxes spoke directly to a public that, in the words of one contemporary economist, “sought insurance that none would profit from the nation’s misfortune.”
Our current misfortune, by contrast, is turbocharging corporate profits and, by extension, the personal fortunes of that slim sliver of the American population that owns the vast bulk of the nation’s corporate stock. America’s richest 1 percent, Oxfam notes, how holds 52 percent of corporate share wealth, quadruple the 13 percent share now in the hands of the nation’s bottom 90 percent.
Oxfam America’s new paper, Pandemic Profits Exposed, is calling for a 95 percent tax on 2020 net profits that exceed a company’s average net profits during the four years before the pandemic hit. The tax would only apply to large corporations with at least $500 million in annual gross receipts.
Applying this tax would raise, Oxfam America calculates, almost $80 billion annually from the nation’s top 25 corporations alone. Those billions could help Americans in desperate need of coronavirus-era support. But an excess profits tax would have a broader economic impact as well.
The nation’s five biggest tech companies , for instance, are riding a virus wave that has them “flush with around $557 billion in fresh cash,” as Oxfam notes, “the dry-powder they need to continue to rewrite the rules in their favor while swallowing up key pieces of the U.S. economy.” Taxing excess corporate profits could stall this swallowing.
“None of the most profitable companies have worked harder or made better decisions than the millions of small businesses across the nation about to enter bankruptcy,” Oxfam America sums up. “Americans should expect the companies who have benefitted most to give back in meaningful and democratic ways.”
The decisionmakers at those companies will most likely not agree, not as long as we let outsized corporate profits generate personal windfalls for the execs who commit that outsizing.
In other words, as economist Dean Baker observed earlier this month, “to allow for more pay at the bottom, we have to do something about pay at the top.”
San Francisco voters may do just that this November. Now on the city ballot: a proposal that would up taxes on large businesses in the “city by the bay” that pay their top execs over 100 times more than what their most typical workers take home.
Sam Pizzigati co-edits Inequality.org. His recent books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.