Activists Target Corporate Chiefs' Tax Subsidies
WASHINGTON - U.S. taxpayers shell
out 20 billion dollars a year to pad business chiefs' earnings and to
prop up the world's most lopsided corporate pay scales, say activists
seeking to highlight inequality in this election year.
Various tax and
accounting loopholes encourage excessive executive pay and serve to
allow company chiefs to pay taxes at lower rates than their employees,
the groups Institute for Policy Studies and United for a Fair Economy
said on Monday. Taxpayers foot the bill in the form of forgone public
revenues, they added in a report.
outrageous that our tax dollars are inflating executive pay cheques,''
said Sarah Anderson, an author of the annual 'Executive Excess' report.
''Surely in these troubled economic times we can find better ways to
spend our nation's wealth.''
The U.S. government misses out on
10 billion dollars a year in estimated revenues because current rules
allow firms paying executives stock options to deduct more than their
actual expenses, the report said.
It cited the example of United
Health Group, which it said paid its chief executive, William McGuire,
nine million stock options. The company claimed a tax deduction of
317.7 million dollars for the compensation even as it issued financial
statements suggesting the arrangement had cost it nothing, according to
the report, which drew its information from official sources and media
Other loopholes unavailable to ordinary taxpayers allow
executives to defer unlimited amounts of pay, to move earnings to
offshore tax havens, and to stash unlimited sums in tax-deferred
retirement accounts, according to the report.
politicians to close all the loopholes and to change labour laws to
make it easier for workers to bargain collectively for better wages.
John McCain and Barack Obama have incorporated tirades against
corporate excess into their respective campaigns for the U.S.
presidency. Neither candidate has endorsed the sweeping changes
favoured by the report's authors.
'The bipartisan attacks on
runaway pay are encouraging but if the candidates are serious about
change, they should vow to plug every single loophole that allows our
tax dollars to flow into the pockets of top business leaders,' said
The report was timed to coincide with Monday's opening
of the Democratic National Convention and to precede next week's Labour
Day holiday and Republican National Convention.
Large U.S. firms
paid their chief executive officers (CEOs) an average of 10.5 million
dollars in salary, stock options, incentives, and bonuses last year --
344 times what the average worker earned. The report said this
disparity likely would worsen because job growth is mainly concentrated
in industries with the widest pay gaps.
The United States has
long had the industrialised world's widest pay gaps. CEO compensation
swelled from 85 times what workers earned in 1990, to 209 times in 1996
and 419 times in 1999, according to the government's Bureau of Labour
Statistics. It peaked in 2001, at 525 times workers' average earnings.
Comparable figures for other wealthy nations generally did not exceed the double digits.
pay growth often bears little resemblance to firms' performance. U.S.
bosses' pay rose 313 percent from 1990 to 2003. By contrast, the
Standard & Poor's 500 stock index rose 242 percent and corporate
profits gained 128 percent.
During the same period, average worker pay rose 49 percent while inflation climbed 41 percent.
the largest increases in pay have gone to CEOs whose companies have
laid off the most workers or made the deepest cuts in workers'
pensions, moves designed to boost financial statements and the price of
stock, according to previous editions of the 'Executive Excess' report,
now in its 15th year.
These trends, and a series of corporate
financial scandals dating back to around 2000, have motivated
investors, regulators, and their political overseers to focus their
attention on corporate pay.
Labour union-sponsored pension plans
and other investors have launched scores of shareholder proposals
seeking to moderate or regulate CEO pay. Dozens of these have won
majority support. Although shareholder resolutions usually are
non-binding, those that win majority backing have been virtually
impossible for companies to disregard.
Even so, presidential and
legislative candidates have sought to harness public discontent over
CEO pay in the run up to November's general election. Both McCain and
Obama have talked up measures that would increase shareholders' say
over bosses' pay.
However, bills designed to close the
loopholes identified in Monday's report have stalled in Congress. The
report blamed this on pressure from corporate lobbies.