Finally, A Commons Sense Solution for Ending CEO Pay Disparities

Finally, A Common Sense Solution for Ending CEO Pay Disparities

Krista Collard


When CEOs yearly compensation reaches levels of 1,700 times the pay of the company’s average worker, it’s pretty obvious that something, somewhere has gone terribly wrong. As most people are left scratching their heads to find a solution all the talk has been met with nothing more than static inaction.

Fortunately, a few leaders are breathing new life into the fight to end outrageous CEO pay with a pretty straight forward common sense solution. With the help of globally respected labor and economic expert Robert Reich and the California Labor Federation, legislation introduced State Senators Mark DeSaulnier and Loni Hancock has cleared its first hurdle when it passed the Senate Governance and Finance Committee on Thursday.

SB 1372 creates a new corporate tax table that decreases taxes for employers with reasonable differences between CEO and worker pay, and increases taxes on companies with large disparities between CEO and worker pay.

Robert Reich:

“This growing divergence between CEO pay and that of the typical American worker is not just wildly unfair, it is also bad for the economy. It means most workers these days lack the purchasing power to buy what the economy is capable of producing—contributing to the slowest recovery on record. Meanwhile, CEOs and other top executives use their fortunes to fuel speculative booms followed busts.”

Under SB 1372, taxes would decrease for companies in which the CEO makes no more than 100 times of the average salary of workers. Taxes would increase on companies that pay CEO’s 100-400 times more than workers.

Senator DeSaulnier:

“History has taught us that the gross disparity between CEO and worker pay is a direct threat to American democracy. The difference between CEO and worker pay has sky rocketed over the past few decades—it is unsustainable and a danger to our society. We must focus on restoring the middle class and stop fueling excessive income inequality.”

Senator Hancock:

“This bill begins to address rising income inequality. Virtually all of the economic gains of the last several decades have gone to the very few at the top, while hard-working families struggle to hold their own.  This inequity is now recognized nationally as a threat to the middle class, and ultimately, to the future of American democracy. Our bill is a start toward creating incentives for ethical and responsible corporate behavior that respects the contributions of all its workers and employees.”

According to the AFL-CIO’s Executive Pay watch, in 2012, the CEO of an S&P 500 Index company received an average compensation of 354 times more than the median US worker. In 2012, the average CEO pay in California was $5,054,959, while the median worker pay in California was $48,029. Additionally, SB 1372 imposes a penalty on corporations that shift their employment practices to contract employees.

Art Pulaski:

“There’s no excuse for a company to lavish its CEO and top executives with tens of millions of dollars they use to buy second mansions and yachts while the company’s workers languish below the poverty line. SB 1372 is a common sense proposal to rein in out-of-control CEO pay. It provides incentive for corporations to act responsibly. It’s a step in the right direction to address income inequality. And most importantly, it restores balance and fairness to California’s economy.”