business news in context, analysis with attitude

by Kevin Coupe

The issue of income inequality continues to make headlines ... but I have to admit that I didn't see this one coming.

The Portland, Oregon, City Council has voted to impose a surtax on companies where the CEO makes more than 100 times the median pay of rank and file employees. It will be a 10 percent business tax surcharge for companies where the CEO makes more than 100 times that median pay level, and a 25 percent business tax surcharge if the CEO makes more than 250 times the median pay level.

The New York Times reports that this is the first such attempt by a locality to address income inequality in this way. "The tax will take effect next year, after the Securities and Exchange Commission begins to require public companies to calculate and disclose how their chief executives’ compensation compares with their workers’ median pay. The S.E.C. rule was required under the Dodd-Frank legislation enacted in 2010."

Of course, it is possible that these Dodd-Frank provisions could be repealed by a GOP-controlled Congress and a Trump administration.

But for the moment ignoring what will happen with Dodd-Frank, I have to say that I'm not crazy about this idea.

I think companies should address income inequality, and I like it when a CEO keeps his or her salary within reasonable levels compared to rank and file employees. To me, it sends a positive statement to employees. And I think it is entirely appropriate for public companies to make discrepancy levels clear so that investors can make informed decisions about these companies.

I don't think it needs to be legislated, though. It seems to me that what Portland's leadership has done is create a climate in which businesses won't want to move to the city. They can put their headquarters just a few miles away and avoid the tax. And it gives communities competing with Portland a compelling argument to choose them.

Though I have to admit, this probably has an upside ... for me. Because I suspect that this won't contribute to rising housing prices there, which will be important to me when I finally make my move.

That's my definition of an Eye-Opener.
KC's View: