How could Congress structure bailouts to encourage executives to nurture long-term enterprise effectiveness?
What could Congress do to discourage the destructive short-term executive behaviors that make for defective enterprises? Congress could start linking the rewards that go to executives at the corporate top to the well-being of workers at the corporate bottom. Rep. Barbara Lee from California has already introduced legislation that offers a useful benchmark standard for doing just that. Her pending Income Equity Act would deny companies tax deductions on any executive pay that runs over 25 times the pay of a company’s lowest-paid worker. Last year, the typical big-time U.S. CEO made 344 times the pay of average American workers. Rep. Lee’s ratio — a pay range that has roots deep in the research literature on enterprise effectiveness — could become our new bailout standard: No tax dollars to any enterprise where executives take home over 25 times the compensation of their workers. With a standard this clear in place, top corporate executives would have a powerful incentive to pay their wo
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