It's no surprise that local business interests oppose a proposal from Commissioner Steve Novick to penalize companies that pay their CEOs exorbitant sums.
In a recent hearing on Novick's idea to hike fees on companies that pay CEOs at least 100 times the median employee's salary, a Portland Business Alliance (PBA) representative said the rule was misguided, and likely wouldn't increase worker pay or bring down CEO salaries, as Novick hopes.
"We don't think this proposal will actually get us very far... in addressing what is a global and national issue," the PBA's Marian Haynes told City Council, referring to the nation's growing wealth inequality.
The Wall Street Journal agrees. The Journal's editorial board dropped an editorial yesterday (subscription required but bootleg version here) throwing shade at the proposal. The board, like Haynes, sees it as a misplaced effort that might "leave local workers with a very bitter aftertaste" if companies slash low paying jobs to reduce their CEO pay ratios.
"By choosing not to hire entry-level workers when openings arise—or by choosing to let low-wage workers go when layoffs are required—companies can instantly reduce their ratios and avoid tax hikes, as well as bad publicity," the editorial says.
Novick's idea, cribbed from efforts that have been floated elsewhere, is the result of a recent decision by the US Securities and Exchange Commission to require publicly traded companies to disclose the ratio their CEOs are paid compared to the average worker.
Novick's said his proposal could make the city up to $3.5 million a year. It would do by slapping a 10 percent charge on top of the business license tax companies pay the city to operate here, if their CEO is paid at least 100 times more than the median employee pay. Companies that pay their CEOs 250 times or more the median employee would see a 25 percent surcharge.
Those imbalances aren't uncommon.
"We’ve looked at some ratios that are well above 1,000-to-one and verified those," the city's revenue director, Thomas Lannom, told council at the recent hearing. The Oregon AFL-CIO says the state's CEOs are paid, on average, 327 times the rate of average employees.
Novick's strategy has two aims. First, he's looking to shore up new revenue, as the city stares down budget holes expected next year. Second, he's trying to set an example the rest of the country will follow. He's agreed with skeptics like Haynes and Commissioner Dan Saltzman that the charge wouldn't much help the nation's wealth inequality issues if only Portland adopts it.
"I'm under no illusion that what just Portland does will have a dramatic impact on the Fortune 500," Novick said at last month's hearing. "An idea that starts in one place will spread to others."
As it happens, that's one thing he and the WSJ agree on.
"Mr. Novick appears to have the votes in Portland and he’s hoping this tax idea will spread nationwide," the paper's editorial reads. "We’re guessing he won’t be disappointed."
Novick, a progressive commissioner looking to get a lot done in his final weeks in office, is of course pleased by the editorial, saying a national audience is likely to help his idea spread.
"In addition to being just good policy, this is exactly the kind of proposal that Democrats need to be promoting if we want the working class voters who supported Trump to believe we are on their side," Novick wrote in an email to reporters this morning. "Clinton lost because of her ties to Wall Street. The more policies we can push that are attacked by the Wall Street Journal, the better off we will be."
City Council is expected to take up Novick's proposal again next month.