Washington, DC – U.S. Senators Kirsten Gillibrand and Dick Durbin today announced legislation to rein in excessive CEO pay and put taxpayers first. The Stop CEO Excessive Pay Act would put taxpayers first by closing the tax loophole that allows companies to deduct part of the amount they spend on executive compensation. This bill also gives shareholders a vote in determining whether CEOs should get a substantial raise or bonus. Under the current system, companies can get a tax deduction for excessive CEO pay and pay CEOs massive amounts of money with little input from shareholders.
“In the last few decades, while the middle class has been shrinking and workers’ wages have hardly budged, corporations have been paying their CEOs higher and higher salaries – more than 300 times higher than regular employees in some cases. In other words, too many corporations have stopped rewarding work, and it is harming our economy,” said Senator Gillibrand. “This legislation would take away a major incentive that corporations use to pay extremely high wages to their CEOs, by putting a cap on the level of CEO pay that corporations can deduct from their taxes as a business expense. The government should not be subsidizing CEO pay at the expense of workers and the middle class. I am proud to lead this bill and fight for our workers with Senator Durbin, and I urge all of my colleagues in the Senate to join us in supporting it.”
“It is no secret that the top one percent of U.S. earners take home a disproportionate amount of income compared to the rest of American workers. In fact, today the top one percent takes home more than 20 percent of all U.S. income,” said Senator Durbin. “I’m proud to introduce this pro-transparency bill with Senator Gillibrand to tackle rising income inequality without hurting competition.”
“For too long, CEOs have rigged the rules to benefit their own compensation while denying working people the freedom to negotiate a fair return on our work,” said AFL-CIO President Richard Trumka. “Out of control CEO pay that vastly outpaces workers’ wages has led to growing economic inequality. This bill is a positive step toward holding corporations accountable by fining excessive executive pay levels that have not been approved by their shareholders and moves us closer to an economy that works for all working people.”
“This legislation takes an important step to arrest runaway executive pay, and reduce taxpayer subsidies for what, in effect, has become a besuited exercise in looting,” said Bartlett Naylor of Public Citizen.
“This sensible legislation would put a stop to everyday Americans subsidizing extraordinarily high CEO pay with tax breaks, and would give shareholders a real say before giant pay package can be approved,” said Marcus Stanley, Policy Director at Americans for Financial Reform.
“The CEO pay loophole is one of the worst tax breaks in our special-interest rigged tax code,” said Frank Clemente, Executive Director, Americans for Tax Fairness. “This tax deduction for bonus pay makes regular taxpayers subsidize the income of wealthy CEOs, who get paid 300 times more than the average worker takes home. And many of the big corporations these CEOs lead pay tax rates below what the middle-class pays, if they pay taxes at all. This tax loophole is a scam, and it must end!”
In the years between the end of World War II and the 1970s, as the economy grew, workers were paid more and productivity increased. But in recent decades, worker pay has stagnated even as corporations have continued to pay their CEOs more and more. According to the AFL-CIO, the average CEO of some of the largest corporations in the country makes $13.1 million a year, which is approximately 347 times what the average worker in America makes. Over the past 10 years, taxpayers have paid $50 billion in tax subsidies due to the loophole that allows companies to deduct part of the amount they spend on executive compensation.
Specifically, the Stop CEO Excessive Pay Act would do the following:
- Close the executive compensation loophole by eliminating a company’s tax deduction on executive compensation that is “excessive,” defined in this legislation as more than 25 times the median income of their employees or more than $1 million, whichever is less;
- Require that a public company may only pay “excessive” amounts if a majority of shareholders vote to approve the compensation within 18 months of the compensation being paid; and
- Require that if a company does not receive the majority vote, the Securities and Exchange Commission can issue a non-tax-deductible fine for the amount of excessive compensation.