How Our Tax Dollars Subsidize Exorbitant CEO and Executive Pay

** Press Conference call today, August 16, 11:00AM ET **
** Dial-in: 712-432-0075; Passcode: 385784 **

19th Annual ‘Executive Excess‘ Report

Washington, D.C. — A new Institute for Policy Studies report released today offers the first comprehensive analysis of the intersection between tax loopholes and excessive executive compensation. As outlined today in the Washington Post and other news sources, the study lists CEOs who received more in pay and compensation last year than their companies paid in federal income taxes.

“Our report details how taxpayers are in effect rewarding corporate executives for gaming the tax system,” says co-author Scott Klinger. “The tax code has become a prime enabler of bloated CEO pay.”

Among the key findings from The CEO Hands in Uncle Sam’s Pocket, the 19th edition of the Institute’s annual Executive Excess compensation study:

  • In 2011, 25 CEOs received more in compensation than their companies paid in federal corporate income taxes.
  • Four major tax loopholes that encourage excessive executive pay cost taxpayers an estimated $14.4 billion every year.
  • CEOs at 57 major U.S. corporations saved more than $1 million last year on their personal income tax bills as a result of the Bush tax cuts.

“At a time of austerity, it’s beyond absurd that billions of our tax dollars are pouring into executive pockets,” notes Sarah Anderson, a report co-author. “Every CEO should be writing a thank you card to the IRS.”

For more of the report’s key findings, see below.

Report link: http://www.ips-dc.org/wp-content/uploads/2012/08/executive_excess_2012.pdf

To request a hard copy, please contact: [email protected]

PRESS CONFERENCE CALL: 11:00 a.m. ET; TODAY, Thursday, August 16, 2012 Dial-in: 712-432-0075; Passcode: 385784. On the press conference call, report co-authors Sarah Anderson and Scott Klinger will discuss their report findings and answer reporters’ questions about the report.

More Key Findings

CEOs continue to take home more than their companies pay Uncle Sam in taxes

  • In 2011, for the second year in a row, one full quarter of America’s 100 highest-paid corporate chief executives took home more in CEO pay than their company paid in federal income taxes. Seven firms made the list in both 2011 and 2010.
  • Once again, low corporate tax bills—or large refunds —cannot be explained by low profits. On average, the 25 firms had nearly $1 billion in U.S. pre-tax income but still received net tax benefits that averaged $129 million.
  • The CEOs of these 25 firms received $20.6 million in average total compensation last year. That’s a 24 percent increase over the average for last year’s list of 2010’s tax dodging executives.
  • Two of the firms that paid their CEOs more than Uncle Sam—Citigroup and AIG—owe their very continued existence to taxpayer bailouts.
  • Combined, the 25 firms have 533 subsidiaries in tax-haven countries such as the Cayman Islands, Bermuda, and Gibraltar.

Executives are gaining big-time from tax loopholes that encourage and reward excessive pay

  • The four most direct tax subsidies for excessive executive pay cost taxpayers an estimated $14.4 billion per year. That amount could cover the annual cost of hiring 211,732 elementary-school teachers or creating 241,593 clean-energy jobs.
  • The tax code currently places no real limit on how much “performance-based” compensation corporations can deduct from their taxes. The top five 2011 beneficiaries of this loophole had a combined $232 million in deductible “performance-based” pay. Absent this loophole, the tax bills for these companies would have jumped $81 million, or an average of more than $16 million per CEO.
  • The tax code also allows corporations to defer unlimited sums of CEO compensation. The top five executive beneficiaries of this loophole in 2011 deferred $48 million in compensation. Without this loophole, their combined personal tax bills would have been $17 million higher.
  • Four years after the crash, the billionaire hedge fund managers at Wall Street’s pinnacle still pay taxes at lower rates than their secretaries, thanks to the preferential treatment of “carried interest” income.
  • The top five corporate beneficiaries of the stock option accounting loophole, which allows corporations to show one set of books to shareholders and another to the IRS, reduced their federal and state tax bills in 2010 by almost $683 million.

Executives are saving mega millions from the Bush tax cuts

  • CEOs have benefited enormously from the Bush tax cuts for upper-income taxpayers. Last year, 57 CEOs saved more than $1 million on their personal income tax bills, thanks to these Bush-era cuts.
  • The top CEO beneficiary of the Bush tax cuts in 2011, James Mulva of ConocoPhillips, saved $6.7 million. Mulva cashed in more than $140 million in stock options in his last year at the energy company’s helm.

Executive Pay Reform Scorecard

This year’s Executive Excess includes an updated scorecard that rates pay recent reforms, as well as those pending in Congress and a few not yet on the table. The Scorecard offers a status report on the executive pay-related provisions in the Dodd-Frank financial reform legislation, noting that regulators have delayed most of the new rules in the face of an intense corporate backlash.

Report co-authors include veteran compensation analysts Sarah Anderson, Chuck Collins, Scott Klinger, and Sam Pizzigati. Last year’s edition received significant media coverage, including in the Washington Post and New York Times.

Institute for Policy Studies (IPS-DC.org) is a community of public scholars and organizers linking peace, justice, and the environment in the U.S. and globally. We work with social movements to promote true democracy and challenge concentrated wealth, corporate influence, and military power.