S.F. Voters Approve First Tax for “Disproportionate CEO Pay”

On November 3, voters approved a local San Francisco ordinance on the ballot which creates a special tax on companies that pay their CEOs more than 100 times as much as the median worker’s salary.  The tax escalates from 0.1 percent of gross receipts made in San Francisco at the 100x level to a maximum of 0.6 percent if the CEO’s salary exceeds 600 times as much as the median worker. 

The debate over excessive CEO pay has targeted three concerns: the conflict of interest when a CEO has a major input to his or her own salary, the inequity of high CEO salaries built on low employee pay, and the impact high salaries may have on how a CEO behaves.  Will a CEO bend the rules to increase the  company’s profits and his or her own bonus?  Will a CEO ignore information about misconduct in the organization to escape a collapse in the company’s share price?

The Dodd-Frank Act of 2010, enacted in the wake of the 2008 scandals and financial meltdown, give shareholders of most large corporations the right to vote on executive compensation packages.  Many doubt these “say on pay” votes have had much effect, as only a very small number have been voted down. 

In my view, the San Francisco ordinance is a blunt and flawed law, but I understand the public frustration at the persistent failure to control the growing inequity between CEO and average worker pay.  It is not surprising that San Francisco is the battleground for this latest skirmish: San Francisco has repeatedly ranked first in the country in income disparity, and the city prides itself as a pioneer in social legislation.

Relevant article:

San Francisco voters approve first-in-the-nation CEO tax that targets income gap