Monday, May 23 2016 20:02 EEST
Robert Reich: A better way to control CEO pay is by linking it to the corporation’s taxes
Shareholder, capitalism, value, business , funds, Robert Reich, facebook, opinion, CEO, tax, control, corporation, position, world

Shareholder value is a business term, sometimes phrased as shareholder value maximization or as the shareholder value model, which implies that the ultimate measure of a company's success is the extent to which it enriches shareholders. It became popular during the 1980s, and is particularly associated with former CEO of General Electric, Jack Welch.

American political commentator, economist, professor, and author Robert Reich shared on Facebook:

'Shareholder capitalism doesn’t work the way textbooks say it does -- with shareholders, as the owners of the corporations they invest in, voting on issues like the compensation of top executives.

In reality, your shares are voted by big pension funds or mutual funds that don’t want to rock any boats, and almost always vote yes on executive pay. BlackRock, for example, has voted with management 97 per cent of the time. Other big funds have been as, or even more, pliable (see chart, below).

This cozy system helps explain why executive pay is out of control, with the typical CEO of a big corporation now raking in over 300 times the pay of the typical worker (in the 1960s, CEO pay averaged 20 times the pay of typical workers) regardless of how the corporation performs.

This is absurd. A better way to control CEO pay is by linking it to the corporation’s taxes – making corporate taxes higher on corporations with higher ratios of CEO pay to the median pay of American workers, and lower on corporations with lower ratio.'

A chief executive officer (CEO) describes the position of the most senior corporate officer, executive, or administrator in charge of managing an organization.

The CEO of a corporation or company typically reports to the board of directors and is charged with maximizing the value of the entity. Titles also often given to the holder of the CEO position include president and chief executive (CE).

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