Obama Restrictions on CEO Pay Signal Progress, But Tougher Limits Needed

Mandate authors, and compensation experts with the Institute for Policy Studies (IPS), Sarah Anderson, Sam Pizzigati, and Chuck Collins yesterday called President Barack Obama’s $500,000 cap on executive pay at some bailed-out companies a “small, but very welcome first step toward ending excessive executive compensation.”

“After 30 years of escalating CEO pay, we finally have a President who has taken a concrete step toward limiting the dollars that are cascading into executive suites,” notes Sarah Anderson, the lead author of Executive Excess, the annual Institute report that tracks the gap between CEO and worker pay. “But given the level of public outrage over the Wall Street bonus bonanza, the administration should have gone much further to stop bailout profiteering.”

The key shortcoming of the administration plan is that the $500,000 pay cap will apply to only a handful of firms getting “exceptional assistance.” In recent news reports, administration sources have argued that troubled banks would chose not to accept government assistance if broader pay restrictions were imposed, for fear of losing key personnel.

IPS staff argues that a better approach is offered by Senator McCaskill (D-MO) who today pushed a stronger approach, introducing a bill as amendment to the stimulus package that would cap executive pay in bailed-out firms at no more than $400,000 — the salary of the President of the United States.

Click here for a more detailed analysis of the McCaskill bill and the executive pay provisions in the TARP reform bill recently approved by the House.

Break the Link between Wealth and Political Clout

Concentrated private wealth tilts the political deck against the interests of average families in a variety of ways, mainly because the handful of super-wealthy citizens can easily transform their wealth into political clout. For this reason, the Americans least able to cope during an economic downturn find themselves with little government support, while the CEOs of bailed-out banks and government contractors take in higher pay and larger bonuses than ever before. In order to make the political system more representative and responsive, the next administration should

• Stop rewarding unearned income by reinstating the estate tax and ending preferential tax treatment on capital gains.

• Require government contractors to disclose their top executives’ pay and the gap between executive and worker pay.

• Restore serious progressivity to the federal tax system and subject the assets of the rich, not just the middle class, to taxation.

Author:  Sam Pizzigati, Editor Too Much