Garment Workers Take on Wage Theft and Wall Street
A new international campaign is targeting fashion brands like Nike that are spending vast sums on stock buybacks instead of compensating workers for lost pandemic wages.
If elected, Hillary Clinton would have the chance to fix her husband’s CEO pay policy mistake, which costs taxpayers billions of dollars per year and perpetuates the reckless Wall Street bonus culture.
In 1993, President Bill Clinton pushed through a reform that was intended to rein in runaway CEO pay by capping the tax deductibility of compensation at $1 million. Instead, the new rule fueled the explosion of CEO pay by including a huge loophole for stock options and other so-called “performance” pay.
Hillary Clinton has said she wants to “reform” this loophole, but hasn’t explicitly called for closing it.
A new Institute for Policy Studies report, The Wall Street CEO Bonus Loophole, is the first to calculate how much the nation’s largest banks have benefited from this policy mistake.
Wall Street banks lost this lucrative CEO pay subsidy when they received funds under the Troubled Asset Relief Program, but only until repaid their bailout funds. Many of them rushed to do so, borrowing in the private market in order to escape this and other public bailout-related pay controls.
While homeowners and shareholders were still suffering from the crisis, banks began doling out massive stock-based awards that quickly ballooned in value, giving the banks huge tax write-offs.
The report also includes detailed information on individual executives who received massive stock-based awards after the 2008 crash that quickly ballooned in value, giving the banks huge tax write-offs and leaving ordinary taxpayers to make up the difference.
At PNC Financial, for example, CEO James Rohr got more than 290,000 stock options in early 2009, when the bank’s shares were trading at less than half pre-crisis values. Thanks to a bailout-fueled recovery, Rohr’s options spiked in value to more than $22 million by the time he cashed out 2013.
At JPMorgan Chase, CEO Jamie Dimon cashed in $23 million in stock at the peak of the foreclosure crisis in 2010, when the firm’s stock was trading around 15 percent lower than at the beginning of the market slide. Since then, the bank has racked up more than $28 billion in mortgage and other financial misconduct settlement fees.
Taxpayers should not have to subsidize excessive CEO bonuses at any corporation. But such subsidies are particularly troubling when they prop up a pay system that encourages the reckless behavior which caused one devastating national crisis — and could cause more in the future.
This 23rd edition of the annual IPS Executive Excess series also includes the most comprehensive available catalog of CEO pay reforms, including legislation to eliminate the CEO bonus loophole that would generate an estimated $5 billion per year in additional revenue.
As report lead author Sarah Anderson put it in this op-ed in Politico, “by allowing unlimited deductions for performance pay, the loophole essentially means that the more corporations pay their CEO, the less they pay in taxes. The rest of us get stuck making up the difference.”