How Bill Clinton Helped Boost CEO Pay

[ProSense]

NOVEMBER 27, 2006
GOVERNMENT

How Bill Clinton Helped Boost CEO Pay

A law he championed to curb compensation has backfired -- and pay packages have exploded

Bill Clinton had what he thought was a great idea to curb the soaring paychecks of the nation's executives. It was 1991, shortly after the launch of his Presidential campaign, and he had just read a best seller on corporate greed by compensation guru Graef Crystal.

Clinton's brainstorm: Use the tax code to curb excessive pay. Companies at the time were allowed to deduct all compensation to top executives. Clinton wanted to permit companies to write off amounts over $1 million only if executives hit specified performance goals. He called Crystal for his thoughts. "Utterly stupid," the consultant says he told the future President.

THE SHAME GAME
Now, 13 years after Clinton's plan became law, the results are clear: It didn't work. Over the law's first decade, average compensation for chief executives at companies in Standard & Poor's 500-stock index soared from $3.7 million to $9.1 million, according to a 2005 Harvard Law School study. The law contains so many obvious loopholes, says Crystal, that "in 10 minutes even Forrest Gump could think up five ways around it."

From the Internal Revenue Service to corporate boardrooms, Clinton's remedy has become the biggest inside joke in the long history of efforts to rein in executive pay. It has allowed companies to take deductions for executive pay tied to goals as vague as "individual achievement of personal commitments" (BellSouth Corp.(BLS ) or improving "customer satisfaction" (Dell Inc. (DELL )). Energy giant AES Corp. (AES ) for a time demanded that its top people maintain a workplace that was "fun."

"We were trying to shame companies into changing their behavior," says former Clinton senior adviser Bruce Reed. "And companies have been shameless in ignoring what we did." Or perhaps just astute in exploiting the flimsiness of Section 162(m) of the IRS code, as the measure is formally known. Reed acknowledges that the Clinton team deliberately watered down the proposal to make it more palatable by, for example, not applying the performance requirement to the award of stock options. Clinton did not return calls for comment.

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[blm]

1. I wish that was the most naive thing he ever did - but closing the books on Poppy Bush

so he could have a "peaceful retirement" and the Republicans in DC would like him better and cooperate with him is just about the BIGGEST DUMBASS MOVE that any Democratic president has EVER MADE!

http://www.consortiumnews.com/2006/111106.html

[Eric J in MN]

2. Higher income taxes on income over a million...

...is probably a better way to deal with excessive pay.