Many of the highest paid CEOs are profiting at the expense of their stockholders – and at the expense of American taxpayers, according to a study released Wednesday morning by the progressive Institute for Policy Studies.
A surprising 38 percent of these corporate titans were either fired involuntary, led companies that were penalized for fraud, or received a taxpayer bailout after the 2008 financial crash.
“This report should put an end to any remaining sense that we have ‘pay for performance’ in corporate America,” said Sarah Anderson, a co-author of the report and a director at the Washington-based think tank.
Most CEOs defend and justify their compensation based on what peers earn, in addition to citing the risks they accept in guiding complex companies with far-flung operations. The Institute for Policy Studies has frequently criticized their incomes, so it’s not surprising that the other 62 percent who avoid being booted, busted or bailed out are largely ignored by their research.
But the report demonstrates how the U.S. tax code contributes to accelerating CEO pay packages at a time when wages for average Americans have flatlined. It’s a common concern among labor unions that are pushing for the Securities and Exchange Commission to require that companies disclose the CEO-to-worker pay ratio.
The analysis examined compensation for each of the 25 highest paid CEOs over the past 20 years. Of that group, 22 percent of the executives led companies that received taxpayer assistance during the financial crisis – including Jamie Dimon at JPMorgan Chase and Lloyd Blankfein at Goldman Sachs.
Another 8 percent were fired, but escaped with golden parachutes that averaged $48 million. The next 8 percent led companies that paid fines and settlements that were related to anti-trust violations, accounting fraud, Medicaid kickbacks, and insider trading.
Congress enabled the CEO bonanzas with a 1993 law that placed a $1 million cap on deducting the expense of executive pay. But the cap does not apply to stock options – so compensation was skewed toward this supposedly performance-based incentive.
Congress’s Joint Committee on Taxes estimated that removing the performance-based exception would generate another $50 billion in tax revenues over the next decade. This month Sens. Jack Reed (D-RI) and Richard Blumenthal (D-CT) introduced the “Stop Subsidizing Multimillion Dollar Corporate Bonuses Act” to close this loophole.