Sen. Claire McCaskill (D-MO) wants CEOs of firms receiving Federal bailout money to be paid no more than the President, i.e. $400,000 a year.
I think she has the right kind of idea, but the version I advocate is that CEOs of publicly traded corporations should be limited in salary to a certain multiple of the median of entry level employees.
Unlike many right wingers, I think these kinds of limits are good ideas. What most people forget about the concept of a corporation in the American experience is basic first-day-of-law-school stuff: A corporation is a governmentally-recognized artificial person. No government? No corporations. Also, you need another level of government permission to slice up your ownership into shares of stock.
It is no less insane for governments to make basic rules for the sake of common decency than it is for governments to post speed limits on government built and maintained roads.
Also, most corporate CEOs today are not the moral equivalent of an entrepreneur with a good idea who makes a lot of money. They are merely high level managerial employees. Better paid and compensated employees, no doubt, but employees nonetheless.
Frankly, high CEO compensation is not the most pressing issue in the world, nor much the reason why the companies they supervise are in trouble. However, for me, it’s the principle of the thing.
Also, the tax implications are nil because the top marginal tax rate for corporations is the same as that for individuals, so a dollar of high salary to a CEO that isn’t paid and isn’t taxed at 35% is a dollar of corporate profit that is taxed at 35%.
If your company does better, a CEO can get paid more under my proposal if the median entry level wages and/or salaries increase. However, the upward trend is not inexorable, because there is only so much than entry level workers can be paid in aggregate. But, again, it’s a moral thing with me — if the company can’t afford to pay the entry level a median of $50,000 a year, then the CEO has no business making more than (as an example) 20 times that, or $1 million a year.
Also, I am of the opinion that the higher one advances in the corporation, the less likely it is that one should be allowed to own stock in that corporation. You figure, if you’re on the entry level at a publicly-traded corp, and you own stock, you as an entry-level worker can only affect your own work, not anybody else’s (mostly). Therefore, your only incentive if you own stock is to do the best work you can. If you’re the CEO, and you own stock, mutual fund managers are crawling all over your ass to keep the stock price high, and your work as a CEO not only affects you, but every employee in the corporation. What you’ll do is outsource and layoff, to find the cheapest labor, to make The Street happy. And that personally benefits you.
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The reason I like this multiple-of-median idea better than a McCaskillite absolute salary ceiling is that I think an absolute cap is going too far. There has to be a way for a CEO to make more money, and my idea allows for that — the better the corporation does, the more entry-level workers can be paid, and therefore the CEO can make more. If you put a hard cap of $400,000, they’ll absolutely have no incentive to do a good job.