June 29, 2009
Sen. Durbin’s “Excessive Pay” Bills
– Julie Hoffman, CompensationStandards.com
In May, Senator Richard Durbin introduced two bills aimed at curbing “excessive” compensation: the “Excessive Pay Shareholder Approval Act” (Bill S. 1006) and the “Excessive Pay Capped Deduction Act of 2009” (Bill S. 1007).
The Excessive Pay Shareholder Approval Act would require a supermajority (i.e., 60 percent) of the shareholders to approve the compensation structure of any employee for any year in which the employee receives in excess of 100 times the compensation of the average employee of that company. Compensation would be defined to include salary, commissions, fringe benefits, deferred compensation, retirement contributions, options, bonuses, property and other pay.
In addition, a company would be required to disclose the following in its proxy materials:
– the compensation paid to its lowest paid employee;
– the compensation paid to its highest paid employee;
– the average compensation paid to all of its employees;
– the number of employees who are paid more than 100 times the average employee compensation; and
– the total compensation paid to employees who are paid more than 100 times the average employee compensation.
The Excessive Pay Capped Deduction Act would limit the normal federal tax deduction for compensation for executives to 100 times the compensation of the average worker at that company. Compensation would be defined to include salary, commissions, fringe benefits, deferred compensation, retirement contributions options, bonuses, property and other pay. Employers exceeding this deduction limit would need to report certain pay information to the IRS:
– the amount paid to the employee receiving the lowest amount of compensation during such year;
– the amount paid to the employee receiving the highest amount of compensation during such year;
– the average compensation of all of its employees during such year;
– the number of employees receiving compensation that is more than 100 times the average employee compensation during such year; and
– the amounts paid to the employees receiving compensation that is more than 100 times the average employee compensation during such year.
So far, both bills remain in Committee.