US Debt Reduction Sequester Tax Solution #37: No Tax Loophole Deduction for Board of Directors Approving Extravagant Top Executive Compensation

From my five most recent posts, here's a summary of the average total compensation of top executives working in a small handful of sectors who made at least $10 mil in the most recent year it was disclosed in proxy statements filed with the SEC.

	# of
	Executives
	Making
	Total	Average
	Compensation	Total
	of $10 mil +	Compensation
		$000s
Dow Industrials	55	17,676
Oil & Gas	36	17,625
Health Care	43	15,952
Financial	90	15,946
US Defense Contractors	51	18,199
Total	275	16,931

It's pretty clear that the country has a serious income inequality problem.  President Obama in his last night's State of the Union proposed an increase in the Federal Minimum Wage from $7.25 to $9.00, and which would be subsequently indexed for inflation each year.

This proposal is an excellent first step which would be very helpful in reducing at least somewhat the massive economic gap between the wealthy and everyone else.  Let's hope the US Congress responsibly acts on this wise proposal.

But as you can see from the above chart, which shows that these 275 top executives had an average total compensation of $16,931,000, there is also a massive problem on the upside, where top executives make Total Compensation that is considered extremely extravagant by nearly everyone.

And yeah, this $16,931,000 average executive compensation is 1,168 times the current US federal minimum wage of $14,500, or $7.25 times 2,000 hours worked in a year.  

How have we come to this situation?

Well, it's the Board of Directors of the large US corporations, who both recommend and approve these lavish executive compensation amounts.

So, where are these Board of Directors going off target?

Well, when the Board of Directors make their recommendations for executive compensation, they do so by reviewing the executive compensation of other US large corporations.

Because the executive compensation of the other large US corporations are so incredibly high, then the Board of Directors sets the executive compensation also at extravagant amounts which are consistent with the extravagant amounts of the other large US Corps.

This whole Board of Directors executive compensation scheme is a flat out embarrassment to the country.

So, how do you correct it?  Well, I have a good first step.

I think the US Government should set some reasonable, well thought-out maximum executive total compensation standards, and for any Board of Directors which set and approve total top executive compensation which still exceeds this maximum, the Corporation does not get a US federal income tax deduction for any of the Total Compensation components of the Directors, including the fees paid they are paid in cash, the Stock Awards, the Stock Option Awards, and All Other Compensation they are given.