Inequality, What Inequality?

Via Matt Yglesias, we have Felix Salmon reporting from Davos on the fact that CEOs don’t believe their pay is in any way out of line.

I went to one session on executive compensation yesterday, which was filled with global CEOs of various stripes. And a couple of questions that Lance Knobel would like to ask were, amazingly, raised: should there be some kind of cap on CEO compensation? Maybe in terms of the ratio between the CEO’s pay and that of the average employee? The answer came swiftly and unanimously: no.

This, of course, isn’t surprising. CEOs appear to think that, if anything, they’re underpaid. In my opinion, the best way to let them know that society in general doesn’t think so is with high marginal tax rates on (very) high income. If the CEO faces a marginal tax rate of 60-70% on income over $5 million a year, s/he’ll probably be less interested in negotiating for a much higher salary.

 

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