The disparity between what chief executive officers earn and what their employees earn continues to grow exponentially. CEO pay levels have increased dramatically for more than 20 years. Pay levels for workers, however, have stagnated. This is a much-cited statistic. But now a proposed bill in the California state Senate aims to do something about this.
Two state senators want to make sure that companies based in California pay a price for granting super-sized salaries to their CEOs. Businesses that reward their top officials with outlandish bonuses and salaries would be forced to pay a special tax.
Oracle CEO Larry Ellison, for example, was paid $78.4 million in 2013. If the median pay for all Oracle employees, including contractors and non-U.S. workers, is less than $200,000 (roughly one four-hundredth of Ellison’s pay) — and my guess would be it is — under the new law the company could soon be paying a 13 percent state corporation tax rate, rather than its current 8.84 percent.
The ratio between the pay for a company’s CEO and the median pay of all other employees — known as the CEO/worker pay ratio — has been getting a lot of political attention lately. The most contentious component of the Dodd-Frank financial reform bill has been the CEO/worker pay ratio disclosure requirement — not Say on Pay (the right of shareholders to vote on executive pay), or financial oversight agencies, or creating the Consumer Financial Protection Bureau or even initiating the Volcker rule. More letters have been written by more corporations, shareholders, lawyers and consultants to the Securities and Exchange Commission than ever before, both supporting the disclosure and fighting against it.
The corporate horror that greeted this part of the bill — which requires companies to disclose by how much the CEO’s pay exceeds that of the median workers’ pay — was extreme. Judging by the reaction, the figures are likely so startling that no one wants them made public.