Monday, June 23, 2014

Why We Overpay CEO's And What Can Be Done About It

I was quite surprised to find an article written by Robert Samuelson that I can praise.  He does a decent job in this article of criticizing the rational for CEO compensation systems.  His conclusion in the last paragraph, however, spoils an otherwise good article.  He does a good job of portraying CEO's as our new aristocracy,  and then are argues that we should let the aristocrats change the compensation system that turned CEO's into aristocrats.  Changes in tax policy under Ronald Reagan encouraged CEO's to demand higher pay.  The top marginal tax rate on earned income was dramatically reduced, and lowering the tax on capital gains encouraged CEO's to demand payment in stock options.  Government does not have to regulate the pay system which Samuelson presented as a bad alternative to the current system.  We just need to restore the progressiveness of the tax system.

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