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Should the US Copy Switzerland and Consider a 'Maximum Wage' Ratio

Hugh Pickens DOT Com (2995471) writes | about 10 months ago

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Hugh Pickens DOT Com (2995471) writes "John Sutter writes at CNN that as Swiss citizens vote on November 24 to consider capping executive pay at 12 times what the lowest-paid worker at a company makes in a referendum, which is called the "1:12 initiative," some say the idea of tethering top executive pay to some sort of concrete metric might stop American execs from floating further into the stratosphere. "Here in America, the land of unequal opportunity, the CEOs of top-500 companies make in a single day about what it takes an average "rank-and-file" worker a year to earn, according to the AFL-CIO, the federation of unions," writes Sutter. "Democracy starts to unravel if a few people become wildly, ethereally successful, while the rest of a country struggles." A $1 million salary worked for American CEOs from the 1930s to 1980s, says Lynn Stout. But CEO pay, including options realized that year, jumped about 875%, to $14.1 million, from 1978 to 2012, according to the Economic Policy Institute. "What we've got is basically an arms race," Stout says, "where the CEOs are competing on pay because they each want to have higher status than the others." Peter Drucker, the father of business management, famously said the CEO-to-worker salary ratio should not exceed 20:1, which is what existed in the United States in 1965. Beyond that, managers will see an increase in "resentment and falling morale," said Drucker. Stout has suggested that the IRS make CEO pay a non-deductible business expense when it's higher than 100 times the minimum wage. "Limiting CEO pay to 100 times the minimum wage would still allow top execs to be millionaires," concludes Sutter. "And here's the best part: If the fat cats wanted a pay increase, maybe the best way for them to get it would be to throw political weight behind a campaign to boost the minimum wage.""

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