Happy Labor Day: The average CEO makes 364 time the average worker

We are a nation at war. Unfortunately, the middle class lost. So
choke on this at your Labor Day picnic: the rich keep getting richer
while more and more middle class are forced into poverty, and more and
more children do not have insurance.

Hal


Winning the Class War By Sean Gonsalves, AlterNet
Posted on August 31, 2007, Printed on September 2, 2007
http://www.alternet.org/story/61355/

Every year around Labor Day, United for a Fair Economy (UFE) issues a
report on the excesses of CEO pay.

This year's report -- Executive Excess 2007: The Staggering Social
Cost of U.S. Business Leadership -- found that "top executives
averaged $10.8 million in total compensation, which is 364 times the
pay of the average American worker, a calculation based on data from
an Associated Press survey of 386 Fortune 500 companies."

Another key finding: The top 20 equity and hedge fund managers raked
in an average of $657.5 million, or 22,255 times the pay of the
average worker. Meanwhile, the study notes, workers at the lowest rung
of the economic ladder just got their first federal minimum wage hike
in a decade. Over that same decade, UFE reports, CEO pay has
increased by 45 percent.

None of that is very surprising. What's interesting is the finding
that compensation for U.S. business leaders now "wildly dwarfs" the
big bucks being paid leaders in other sectors.

The top 20 CEOs of publicly traded corporations last year took home,
on average, $36.4 million. That's 38 times more than the top 20 in the
nonprofit sector and 204 times more than the 20 highest-paid generals
in the military.

Executive Excess aims to dispel the notion that excessive executive
pay is a necessary function of modern economies. If that were true,
the report's authors argue, "business executives that American
executives compete against in the global marketplace would be
just as excessively compensated as American executives. They aren't.
Top executives of major European corporations ... last year earned
three times less than their American counterparts."

Such grotesque pay differentials essentially mean we, as a society,
are discouraging needed leadership talent from entering less lucrative
fields, such as education, where we could use an infusion of talent.

The thing I like about UFE reports is they always include pragmatic
policy proposals. This year's report offers six:

* 1) Eliminate tax subsidies for excessive CEO pay, which would
close a tax loophole that allows corporations to deduct excessive CEO
pay packages as a "business expense."

UFE estimates that by closing that loophole alone there would
be $1.4 billion in extra tax revenues -- enough to pay the annual
salaries of 29,000 teachers and reduce class sizes in overcrowded
schools, the study says.

* 2) End the preferential tax treatment given to private
investment company income.

That would plug the loophole in the current tax code that
allows equity and hedge fund managers to pay taxes at a lower rate
than average Americans. Closing that loophole, the Economic Policy
Institute estimates, would add $12.6 billion to the federal treasury,
which could be used to fully fund a five-year expansion of the
public health insurance program for low-income kids.

* 3) Cap tax-free 'deferred' executive pay.

Tax-free deferred pay is unlimited for corporate executives but
strictly
limited by average workers enrolled in standard 401(k) plans.

* 4) Eliminate the tax reporting loophole on CEO stock options.

Because corporations are allowed to report one set of executive
stock option
figures to investors and another to the IRS, it allows corporations to
get tax
deductions that far exceed companies' reported expenses, according to
the U.S. Senate
Permanent Subcommittee on Investigations.

* 5) Link government procurement to executive pay.

The feds should deny procurement contracts to firms who pay top
executives more
than 25 times what their lowest-paid workers make. "The federal
government currently
denies contracts to companies that foster racial and gender
inequality. The same
principle could be invoked to deny contracts to companies that
increase the nation's
economic inequality," the study proposes.

* 6) Increase the top marginal tax rate on high incomes.

The report notes: "... any move to restore mid-20th century top
marginal tax
rates would raise substantial revenue for investments in education and
other social
programs that could significantly broaden economic opportunity."

Indeed, this is class warfare. And as Warren Buffett has noted, his
side is winning.

Fellow rat-race runners, arm yourself with information. It won't win
the war but like
the G.I. Joe cartoons used to say: knowing is half the battle.

Sean Gonsalves is a Cape Cod Times staff reporter and a syndicated
columnist.

View this story online at: http://www.alternet.org/story/61355/


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