Monday, March 23, 2009

Bonuses? Audit the bastards

Corporate America, tax system
need new measures of fairness

You have to wonder about all those banker bonuses – or corporate bonuses in general – when folks are getting a million bucks or more on top of salaries already bordering on the ludicrous.

After all, the President gets a mere $400,000. But even if you add on the benefits, and his own plane and helicopter, and about $150,000 for various expenses, a fat lifetime pension, book and speaking deals, the dough being spread around corporate America is obscene in comparison.

But with all the shouting about AIG, the pendulum of pay seems to have reached its limit and now will swing back – at least a little bit – lest greed give capitalism a bad name. Wouldn’t want the word “capitalism” competing with “socialism” for worst national operating system. (Speaking of which, I hope the folks at Microsoft who jammed Vista down PC buyers’ throats were the first to see layoff notices there… along with the folks whose Windows updates screw up all manner of other software.)

While the bonuses have been generating so much anger, cooler heads in Washington have been pointing out that they represent a tiny fraction of the government bailout money in which AIG is awash. Let it not distract from the wider concerns of taking steps to avoid a total economic meltdown.

I think you can do both – be angry about the obscene compensation paid to all those greedy bastards, and work on the wider challenge of building a ladder to climb out of the incredibly deep fiscal hole.

I have no idea how to build that ladder, not a clue.

But I have an idea about executive compensation, at least for companies that are publicly traded. It’s called fairness.

My definition of fairness: A top executive’s salary cannot exceed that of the company’s lowest-paid full-time employee by more than a hundredfold. Janitors get $20,000? The CEO can make $2 million.

Bonuses? Scale them companywide starting at a 20 percent minimum differential, based on percentage of annual salary. If the CEO gets 50 percent over salary (in the case above, that would be $1 million), the janitor gets at least 10 percent over salary ($2,000). If there’s no bonus paid companywide, why should executives get one?

I recognize that a million-dollar bonus sounds like a lot. But we’re limiting salaries, after all, based on the lowest-paid worker – and rewarding everyone in the company a share of the pie.

That’s at least a start.

Stock options, pensions, health benefits, life insurance all need a level playing field. The million-dollar executive needs health insurance far less than the $20,000-a-year janitor, but you know who has the Lexus in health care and who gets the beat-up Chevy – if at all.

Private companies will, of course, do whatever they want. That’s a shame. But at least imposing a measure of fairness on those that are ostensibly publicly owned would be a start toward taking the greed out of a very screwed-up economic system that until (and maybe despite) the meltdown had seen the rich get ever richer and a widening gulf between them and the poor.

A couple of other ideas to throw around:

Junk the existing income tax system in favor of a graduated scale based on income, with only a few standardized deductions for dependents and disability. Pick a number – say, $25,000 annual income after deductions – where income tax would begin at a flat 2 percent or whatever. Then it increases by set percentages for every dollar earned over specified levels, maybe at $27,500, $30,000, $32,500, and so on upward, maxing out at 35 percent for earned income in excess of $300,000.

Declare or fight a war? Everybody pays a tad more. That’ll make presidents think twice about invading other countries. No free lunch for Americans, and no action without possible consequences for presidents or, for that matter, members of Congress. I seem to recall that the Vietnam war eventually brought a temporary income tax surcharge for many Americans.

But back to those ugly bonuses: I can’t help but wonder what dirty little shenanigans would emerge from IRS audits of executives who got million-dollar bonuses. Might be enough to more than offset their obscene gains.

And for companies that may be tempted but have not yet paid out inappropriate bonuses (and I stress, inappropriate, as in a million bucks), just say “no” – and if those managers and executives don’t like it, tell them to look for a job somewhere else. It’s a very tough marketplace out there in the unemployment lines.

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Change is intuitive and action sublime.

Check out this story

My pal Rafael Alvarez has a nifty economy-related story online at the Christian Science Monitor, reporting from the town where the fictional account of the Joad family's travails began in Steinbeck's "The Grapes of Wrath." Check it out at:


Anonymous said...

Anonymous said...

rather wordy wouldn't you say?
Now a show of hands from everyone that read the entire comment.

Since I have no hope I think I'll go out and buy a gun and shoot myself!

I can understand why 90% of website operators deleated this. I vote delete!!


David Ettlin said...

The "wordy" comment to which you refer turns out to be a rant apparently posted by its author as a cut-and-paste act of annoyance on many blogs, including this one. I read it. I deleted it. Whoever posted it oughta waste people's time on his (and I presume it was a male author) own site, not mine.

David Ettlin said...

Who could disagree with that? (Or, say what?)

Anonymous said...
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