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"capping executive pay at 12 times what the lowest-paid worker at a company makes -- the premise being that a CEO should make no more in a month than a low-level employee earns in a year."
Twelve is pretty low; companies would definitely find loopholes as well. Cutting the low paid staff and use contracting agencies, or finding means of compensation that are outside of traditional salaries.
Totally. However, I love the very unamerican idea of redistribution of wealth, too. I'd like to start by making Birkin handbags completely illegal. What kind of woman spends 50K on an ugly handbag when there are children who don't have enough to eat?
So yeah, maximum wage is a great place to start, IMO.
The idea is nice (12x is pretty low, though) but I don't think it would work in real life. Salary is, for many CEOs, a small part of their overall comp package so, if the law passes, they'll just restructure to have more bonuses and stocks.
I'd like to see CEOs getting the same % pay raise as the average for the rest of the company, however.
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That would be a significant reduction for our CEO. That will never happen, the problem being that for the CEO and other top management there is not the same competition as for lower level positions, and they don't get laid off. They have to be offered a lot to steal people away from another company. It seems ridiculous anyway, because in this situation if a CEO is cut from $400,000/year to $325,000 the company gains $75,000 in profits, which is a drop in the bucket if their annual revenue is 50+ Billion. If they spend that on raises for the other employees and have 10,000 that's only $7.50 each a year.
If we're going to do this, let's start with a liberal bastion: the music industry. If the lowliest street musician makes $1000/yr in spare change dropped into his guitar case, then Beyoncé can make at most $12,000 dollars, the rest to be righteously confiscated from her. It would ruin the music industry. No musician is going to practice 16 hours per day for $12,000. I suppose it would make some people feel very good though.
This was tried actually by Ben and Jerry (the ice cream company) then they had to pull it when the leadership wasn't good enough.
Depending on the size of the company this might not really work. Also the value of the company coupled with sarbanes oxley and signing off and being legally tied to its well being largely requires more compensation.
Having said this a better example would be how much skin the game there is with leadership. If you see a company where the leadership doesn't own even one share of stock then I would say that is odd. On the other side if it is private with no communication that's a bad sign.
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