The widening chasm in income between CEOs and ordinary workers has been increasingly bemoaned as it has expanded seemingly unchecked in the past 20 years. An AFL-CIO study recently found that the pay gap between CEOs and regular workers ballooned from 354-to-1 last year from 195-to-1 in 1993.
These CEOs are supposedly in such cushy positions because they add irreplaceable value to their respective companies. Now the liberal think-tank Institute for Policy Studies has released a new report detailing how this may be no more than a myth, and just how undeserving these CEOS may be.
According to the Institute, nearly 40% of CEOs on the highest-paid lists from the past 20 years were "bailed out, booted or busted." Either their companies either ceased to exist or received large taxpayer bailouts, they involuntarily lost their jobs (but not without golden parachutes valued at $48 million on average), or their corporations ended up paying significant fraud-related fines or settlements, respectively.
The Institute has been doing these studies since 1994, and every annual issue of Executive Excess has had a different focus, from how CEOs game the tax system to how they are rewarded for actions that cause direct social harm, such as downsizing.
The sweeping scope of this particular yearly report, however, draws attention to how these CEOs' leadership doesn't even make sense within the logic of the business world or the government contracts that support them, which are sold to the public as being mutually beneficial. Rather than criticizing our country's outsized military spending, for example, the report cites the contrast between the pay of aerospace giant Lockheed Martin's CEOs and its wasteful military projects, such as the F22 Raptor, which despite being the most expensive fighter jet ever built at $339 million each has never seen action in actual fighting.
The Institute also highlights several promised executive pay reforms that have yet to actually be put into action. CEO-worker pay ratio disclosure, which was part of the Dodd-Frank legislation President Obama signed three years ago, would have made widening pay disparities more apparent to investors, who would hopefully then use their heads instead of just conventional wisdom to choose banks and contracts.
Corporations are also still able to avoid paying taxes by deducting unlimited amounts from their IRS bill for the cost of executive compensation. Though Dodd-Frank did not promise to put an end to this practice, two bills, the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act (S.1746) and the Income Equity Act (H.R. 199), would fix this loophole.
Pay restrictions on executives of large financial institutions also would have prohibited large financial institutions from granting incentive-based compensation based on "inappropriate risks." This surprisingly radical measure, which was supposed to have gone into effect 9 months after the enactment of Dodd-Frank, rests on the notion that greed begets more greed ... a principle that we can see over and over again in this report.