What are immediate reforms Congress should implement?
There are several immediate actions Congress could take today to remove the perverse incentives in the executive compensation system. First, Congress should eliminate incentives in the tax code that encourage excessive pay. They should pass the Income Equity Act, which would cap the amount of pay a company can deduct off their income taxes at either 25 times the pay of the lowest paid worker at a firm or $500,000. Second, Congress could allow shareholders at publicly traded companies to vote on executive compensation. While “Say on Pay” won’t solve this systemic problem, giving shareholders this authority might stop some of the most obscene pay packages. Thirdly, Congress should pass corporate governance reforms that require democratic elections at corporations, truly independent compensation committees, and prohibitions on compensation consultants that have other business with the firm.
