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Many of the Highest Paid CEOs Profit From Taxpayers


Twenty-two percent of the highest paid CEOs led companies that received taxpayer assistance during the financial crisis; another 8% were fired and left with on average $48 millon in severance.

Many of the highest paid CEOs are profiting at the expense of their stockholders – and at the expense of American taxpayers, according to a study released Wednesday morning by the progressive Institute for Policy Studies.

A surprising 38% of these corporate titans were either fired, led companies that were penalized for fraud, or received a taxpayer bailout after the 2008 financial crash.

"This report should put an end to any remaining sense that we have 'pay for performance' in corporate America," said Sarah Anderson, a co-author of the report and a director at the Washington-based think tank.

Most CEOs defend and justify their compensation based on what peers earn, in addition to citing the risks they accept in guiding complex companies with far-flung operations. The Institute for Policy Studies has frequently criticized their incomes, so it's not surprising that the other 62% who avoid being booted, busted or bailed out are largely ignored by their research.

But the report demonstrates how the US tax code contributes to accelerating CEO pay packages at a time when wages for average Americans have flatlined. It's a common concern among labor unions that are pushing for the Securities and Exchange Commission to require that companies disclose the CEO-to-worker pay ratio.

Highest Paid

The analysis examined compensation for each of the 25 highest paid CEOs over the past 20 years. Of that group, 22% of the executives led companies that received taxpayer assistance during the financial crisis – including Jamie Dimon at JPMorgan Chase (NYSE:JPM) and Lloyd Blankfein at Goldman Sachs (NYSE:GS).

Another 8% were fired, but escaped with golden parachutes that averaged $48 million. The next 8% led companies that paid fines and settlements that were related to anti-trust violations, accounting fraud, Medicaid kickbacks, and insider trading.

Congress enabled the CEO bonanzas with a 1993 law that placed a $1 million cap on deducting the expense of executive pay. But the cap does not apply to stock options – so compensation was skewed toward this supposedly performance-based incentive.

Congress's Joint Committee on Taxes estimated that removing the performance-based exception would generate another $50 billion in tax revenues over the next decade. This month Sens. Jack Reed (D-RI) and Richard Blumenthal (D-CT) introduced the "Stop Subsidizing Multimillion Dollar Corporate Bonuses Act" to close this loophole.

Editor's Note: This article by Josh Boak originally appeared on The Fiscal Times.

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