An effort to incentivize fair pay and reign in the growing disparity between CEO and worker pay by Senator Mark DeSaulnier (D-Concord) and Loni Hancock (D-Oakland) is headed to the Senate floor after passing the Senate Appropriations Committee on a 5-2 vote.
SB 1372 creates a new corporate tax table that decreases taxes for employers with sensible differences between CEO and worker pay, and increases taxes on companies with large disparities between CEO and worker pay.
The unprecedented bill has sparked a national conversation about skyrocketing CEO compensation.
“Supreme Court Justice Louis Brandeis warned that we may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both,” Senator DeSaulnier said. “SB 1372 begins to address the growing concentration of wealth at the very top. Out of control income inequality is a direct threat to American democracy.”
“Almost everyone recognizes CEO pay is wildly out of control,” Senator Hancock said. “As former Labor Secretary Robert Reich has pointed out – the growing divergence between CEO pay and that of the average worker isn’t just unfair, it is bad for the economy. The average worker has less purchasing power now than 30 years ago. SB 1372 provides an incentive for responsible corporate behavior.”
Under SB 1372, taxes would decrease for companies in which the CEO makes no more than 100 times of the median salary of workers. Taxes would increase on companies that pay CEO’s 100-400 times more than workers.
According to the AFL-CIO’s Executive Pay Watch, in 2012, the CEO of an S&P 500 Index company received an average compensation of 354 times more than the median US worker.
In 2012, the average CEO pay in California was $5,054,959, while the median worker pay in California was $48,029.
Additionally, SB 1372 imposes a penalty on corporations that shift their employment practices to contract employees.