Take, for example, McKesson CEO John Hammergren, a union buster who took home $51.7 million last year after the company paid nearly $1 billion fines to settle charges it cheated its customers.
The Next New Deal blog explains how these CEOs are also looting taxpayers.
It started when President Bill Clinton signed a law eliminating corporate tax deductions for executive pay higher than $1 million. But the tax change had a loophole: so-called 'performance pay' was still tax exempt.
No surprise as to what happened next:
...companies started dispensing more compensation that qualified as performance pay, particularly stock options. Median executive compensation levels for S&P 500 Industrial companies almost tripled in the 1990s, mainly driven by a dramatic growth in stock options, which doubled in frequency...Performance pay made executives very wealthy, very fast. It motivated them to make shortsighted, risky and sometimes fraudulent decision to boost stock prices. Performance pay led to the mortgage crisis and global financial meltdown in 2008. It encourages CEOs to spend cash on buying back stock to boost the price, rather than research and development, capital investment, workforce training, higher wages and more hiring.
What's worse, taxpayers subsidize that behavior. The Economic Policy Institute estimates taxpayers paid $30 billion for that loophole between 2007-10. According to the Institute for Policy Studies, the CEOs of the top six public food chains “pocketed more than $183 million in performance pay, lowering their companies’ IRS bills by an estimated $64 million.”
Democratic Sens. Ralph Blumenthal of Connecticut and Jack Reed of Rhode Island introduced the Stop Subsidizing Multi-Million Dollar Corporate Bonuses Act, which would end taxpayers’ subsidies to CEOs by closing the performance pay loophole. Teamsters are actively lobbying for more co-sponsors to a companion bill in the House, sponsored by Democratic Texas Rep. Lloyd Doggettl.
