November 19, 2019
More on “Should Companies Pay Penalties for Big Pay Ratios?”
– Liz Dunshee
Executive compensation continues to get more political. Broc blogged a while ago about a Bernie Sanders campaign initiative to tax large companies (public or private) that have a pay ratio of 50x or more – and some other “radical ideas.” Last week, Senator Sanders introduced a bill that looks a lot like that campaign initiative – it would raise corporate taxes by 0.5-5% on high-revenue public & private companies that have a pay ratio of 50 to 500+. Rep. Barbara Lee (D) introduced companion legislation in the House.
One interesting nuance – highlighted in this FAQ – is that the ratio would be based on the pay of the highest-paid employee, not necessarily the CEO. So in the unlikely event that this ever became law, a second pay ratio calculation would be necessary for companies that pay their CEO a nominal amount – and they’d still be on the hook for the tax.