Wednesday, March 25, 2009


We shouldn't limit excessive executive compensation - just tax it and make sure it's fully disclosed to the shareholders! Here's how it could work.

Average the total compensation for the bottom 50% of all the company's wage earners. Say it's about $50,000. Pick a reasonable multiple for top executive compensation - suppose it's 100. That would put the max allowable executive total compensation for that company at $5,000,000 - pretty reasonable by my thinking. If the Board of Directors wishes to exceed that compensation limit, then fine - but tax it. My suggestion would be to tax the executive at a flat 35% (no deductions) and the corporation at 65% (again, no deductions allowed). Finally I would require the corporation to publish the excessive compensation and tax costs on the FIRST page of their annual report - and then let the shareholders decide if that's a good way to spend corporate money!

Benefits of this plan - 1) big executive compensation plans can now be encouraged since we all get to share in any excess compensation via the tax system, and 2) a corporation can avoid the excess compensation tax by increasing the wages and benefits of the bottom half of it's wage earners!

- James O.