There is a problem with the relative distribution of wealth in America.
Historically, this leads to social instability when income disparity becomes too large.
Instead of achieving redistribution through taxation. how about a law limiting the maximum ratio between the highest and lowest incomes within a company?
This sitehas a chart with some sample income ranges.
Some companies (United Health Care) are over 1700:1. This is obviously too high.
Something more reasonable might be 100:1.
The idea is that every person in a company performs a necessary function, otherwise they would not be employed.
Everyone who contributes to the successful operation of the company should share in the success.
This addresses total compensation, not just salary.
It could be monitored by the IRS.
If this topic has been discussed here before, please provide a link.
Even if implemented, this would not quite “fix” the issue of the ultra rich, since there are (I think) more people who fall into that category by capital investment and building companies than by being an overcompensated CEO.
Which isn’t to say that we can’t implement some logical changes. One thing would be to raise short and medium term capital gains rates so it will not give CEOs a perverse incentive to emphasize temporary stock gains at the expense of economic efficiency (such as cutting too many employees to provide a false sense of economy which lowers the company’s chances for growth), provided that companies start scaling back these programs. This could go hand in hand with eliminating or raising the $1,000,000 deductibility cap for companies paying high salaries, so that companies would lean on the inefficient stock options crutch less, and more on regular pay (which is taxed more).
You could also implement shareholders rights laws which would give common stockholders more say in compensation versus the entrenched board members, who scratch each others backs.
So if I own a very successful company and I make $100M I HAVE to pay the janitor who comes in at midnight to clean the toilet a million bucks? No thanks.
Everyone does NOT contribute to the successful operation of the company, at least not in any meaningful way, it’s a matter of degree. If you don’t clean the toilet we’re still gonna do business tomorrow, we’ll just be doing it with a new janitor. If the top salesman leaves and defects to a competitor we could all of us be in deep shit.
Seems like an easy rule to get around. Just keep only the highly-paid employees as actual employees, and contract out all other services to other companies. I make $100 million, my lowest-paid employee makes $1million. The janitor makes $20000, but his CEO (from Acme janitorial service inc) only makes $2million, and I pay his company to have his employee come in at midnight to clean my toilet.
I vote Democratic and I posted it so your remark is patently false, thanks for the completely unneeded political jab though. You never get tired of that shit do you?
Sometimes I think that the better way would be to take the minimum wage and have it indexed with inflation (yes, that would also mean it would go down with deflation); the object would be that minimum wage would reflect and maintain a certain purchasing power, not a dollar amount. That purchasing power is debatable, but I think it should cover what it takes to sustain oneself—to provide food, shelter, clothing, electricity, heat, and so on.
In other words, make it such that a person earning minimum wage will not need government benefits in order to sustain themselves. Human dignity is important, nobody who is willing to work should have to suffer without food on the table and toilet paper in the bathroom.
Yes, you could do that. I don’t see how that is “getting around” anything. As you mention, the owner of the janitorial service has the same rules, so he can’t run a $100 million janitorial company and still only pay the janitor $20,000. I’m not trying to make everything level, just more equitable.
I didn’t say that everyone contributes equally. I didn’t say that everyone has to be paid equally. But I dispute your notion that everyone does not contribute to the successful operation of a company. Again, if they don’t contribute, why did you hire them? Janitorial services contribute by maintaining sanitary conditions to lessen the spread of illness, for example.
But why are they worth 1/100th the value of the CEO?
I say they’re worth less than that.
By “worth,” I don’t mean, “What are the consequences if they are not completed?” I mean, instead, “How difficult would it be to get equal services from another person?”
Steve Jobs could not be replaced with another person in 2003 and still have Apple retain its success. But Apple’s janitor could be.
Back in the early 90s, someone thought it was horrible that Execs were getting such big salaries. They passed some laws stopping the cost deduction for any exec salary over $1,000,000.
So people like me started making a lot of money writing incentive plans for these execs. We made bonus plans, performance share plans, and stock option plans.
Now the stock options had no value on the day of issue, but grew in value over time as the company’s stock went up in price. These option grants were the source of much of the executive earnings - options from prior years that had grown in value.
Are you trying to control salary spread, bonus spread, total cash compensation, total cash compensation plus the value of benefits, or all compensation including stock?
It is a hell of of lot more complicated than just stating a number.
If you DO pass such a law, I will go back into the executive pay space and make money again, helping companies pay their execs a lot of money while still within the law. I might do this by outsourcing stuff, by building special equity shelters, or by having special terms for other compensation that does not count in your new math.
Hmm - another idea. Since you can’t impact ownership itself without completely destroying the economy - I will consult in that sphere. A loan given to execs so that they can buy a ton of a special class of dividend paying shares of stock. The loan itself will be tied to the shares only (can’t be called against any other assets of the employee).
Bingo - the exec gets a piece of the action when the stock price rises, and gets a nice dividend. None of this is salary or bonus or a share grant - it is something that they bought separately. This puts it out of the sphere of your planned legislation.