The most common defense was the “talent retention” argument. In a report filed with the SEC, for example, Hilton explained that the “projected zero payouts” on the CEO’s performance stock awards would’ve “impaired the awards’ ability to retain key talent.”
This is the Great Man Theory: one heroic individual in the corner office almost single-handedly creates company value, so pay him whatever it takes to prevent him from abandoning ship.
The notion that one CEO is worth hundreds — if not thousands — of times more than their workers has always been absurd. But in the middle of a pandemic crisis, when frontlines employees are demonstrating just how essential they are to our economy and health, it’s even more preposterous.
So what can we do about it?
One bill pending in Congress, the Tax Excessive CEO Pay Act, would use tax policy to incentivize corporations to narrow their pay divides by reining in executive compensation and lifting up worker wages.
Under this proposal, companies with pay gaps between their highest-paid executive and median worker of less than 50 to 1 would not owe an extra dime. Corporations that refuse to narrow their gaps below this threshold would face graduated rate increases starting at 0.5 percentage points on ratios of more than 50 to 1 and topping out at 5.0 percentage points for companies with gaps above 500 to 1.
The Tax Excessive CEO Pay Act would generate an estimated $150 billion over 10 years that could be used to create good jobs and meet human needs. If the bill had been in place in 2020, Walmart, with a pay gap of 1,078 to 1, would have owed an extra $1 billion in federal taxes — enough to fund 13,502 clean energy jobs for a year.
Amazon, with a 1,596-to-1 pay ratio, also would have owed an extra $1 billion, enough to underwrite 115,089 public housing units for a year. (Amazon’s highest-paid exec last year was Worldwide Consumer CEO David Clark, with $46.3 million.)
Home Depot, with a 511-to-1 gap, would have owed an extra $800 million, enough to create 18,329 jobs that pay $15 per hour with benefits for a year.
It’s time for public policy to shift corporate America away from a business model that creates obscene wealth for a few at the top and economic insecurity for so many of the rest of us. By inflating executive compensation while their workers struggled during a pandemic, corporate boards have just strengthened the case for tax penalties on huge CEO-worker pay gaps.
