Tim,
I don’t think America’s CEOs deserve stratospheric pay, and have never said so (I’m not responsible for a title that an editor puts on something I write, as you well know). Quite the contrary: I’ve been arguing for years that CEO pay is outrageous—and it’s become even more outrageous since I first began yelling about it. Even more outrageous is the pay of hedge-fund managers, private-equity managers, venture capitalists, investment bankers, and the rest of Wall Street. (According to a study by University of Chicago professors Steven Kaplan and Joshua Rauh, the top one-half of 1 percent of American earners contains more than twice as many Wall Street financiers as corporate executives.)
What to do about exorbitant pay? Raise the marginal income tax on the superrich.
Just don’t count on shareholders to constrain CEO pay. They haven’t and won’t. Most of us are shareholders—typically through our 401(k) plans or pension plans—and we don’t even know which firms they’ve invested in at any given time; we’ve left that choice up to the managers of our pension or mutual funds. Most of us are interested in only one thing—getting as good a return as we can. That’s why “shareholder democracy” is such a joke.
Of course corporate boards are often larded with a CEO’s old golfing buddies, especially board committees in charge of executive pay. But even when “independent” directors are in the majority, even where executive pay is fully “disclosed” to shareholders, even—as in the United Kingdom—where shareholders are supposed to approve CEO pay, nothing slows it down.
The real outrage is that we’ve allowed the tax code to succumb to the blandishments of powerful CEOs and Wall Streeters. Why do you suppose private-equity and hedge-fund managers who are raking in hundreds of millions a year are subject to a 15 percent marginal tax rate, lower than most middle-class Americans? Why are Democrats so reluctant to change this or raise taxes on the superrich? Because Wall Street and CEOs have lined their campaign coffers. (And, Tim, I’m afraid that includes the coffers of your favorite presidential candidate.)
Bob
