“‘Pay-for-luck’ means that CEO performance and rewards are completely divorced. The Wall Street Journal’s 2014 pay survey found that only one of the 10 highest-paid CEOs ranked among the top 10 percent by investor performance. Five rigorous academic studies have found little, or even negative correlation between CEO pay and performance,” Clifford writes.“If people understood the insane level of true CEO pay, maybe things would change. The Securities and Exchange Commission should require companies to disclose true CEO pay with gains on stock and options included.
“If that happened, the resulting outrage might become so intense that boards and politicians would seriously consider curbing excessive CEO compensation. My favorite remedy is a luxury tax, a levy used by Major League Baseball to control player salaries,” Clifford writes. “The IRS should do the same to corporations. For every dollar over $6 million that a company pays an executive, it should pay a dollar in luxury tax to the US government. This would include all forms of compensation including gains on stock options and golden parachutes.”
Read more in the full article here.
MacDailyNews Take: Why pay it directly to the government? You like wasting money? In 2015, the federal budget was $3.8 trillion or roughly $12,000 for every woman, man and child in the United States.
We don’t have a trillion-dollar debt because we haven’t taxed enough; we have a trillion-dollar debt because we spend too much. — Ronald Reagan
The American people are not undertaxed, the government in Washington is overfed. — Ronald Reagan
Why must everything that moves (or not) be taxed? If you like this luxury tax idea, why not make it law that every dollar over $X million (we’re not sure where Clifford came up with $6 million; was he thinking of Steve Austin?) that a company pays an executive, it must pay a dollar back to the shareholders in the form of dividends (which, of course, will be taxed anyway)? That would have the same effect of tamping down executive compensation, but it would also stimulate investment (as many people reinvest dividends) and the economy at the same time.
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[Thanks to MacDailyNews Reader “Lynn Weiler” for the heads up.]