LATE LAST YEAR, by a slim margin, Portland became the first city in the US to penalize egregious CEO pay—that stark symptom of this nation’s growing wealth inequality.
The city’s new pay ratio surtax was one of the last wins for outgoing Commissioner Steve Novick, who was alternately fawned over in the New York Times and whined at by a Fox News anchor for pushing the idea.
The proposal was more than rote symbolism. Since Portland passed the law, San Francisco and Rhode Island have begun exploring the same policy, a domino effect Novick argued would be necessary to actually force companies to change.
There was a local outcome, too. The penalty—a 10 percent charge on top of Portland business license fees for public companies that pay their CEOs 100 times the median worker salary, and a 25 percent charge for companies with CEOs making 250 or more times the median worker salary—is expected to bring up to $2.5 million every year as the city approaches some very real financial holes.
That money is built into the city’s ongoing revenue projections, and so has been on course for easing the upcoming budget season, where cuts may be necessary.
Except now Donald Trump is in office, so of course the whole thing might have to be scrapped.
Earlier this month, the acting chairman of the US Securities and Exchange Commission (SEC), Michael Piwowar, very strongly hinted he wants to gut the provision Portland’s CEO penalty is based on: a new regulation that, as of this year, forces publicly traded companies to disclose their CEO’s pay ratio compared to the median worker.
Piwowar issued a statement February 6 asserting vague “compliance difficulties” with the new disclosure rule, and all but promising he’d take it off the books if enough companies complain.
Novick tells me he’s concerned his policy could be de-fanged, but also hopeful that the disclosure rule is too politically difficult to ax.
While that all plays out, though, it appears Portland’s budget will be tighter than expected.
Mayor Ted Wheeler, who I’m told has been skeptical of the new tax, plans to press forward with next year’s budget as if that anticipated $2.5 million weren’t on the books.
“Since the SEC is backing off of the reporting requirement, it would be irresponsible of us to budget for that revenue,” says Wheeler’s spokesperson, Michael Cox.
That makes sense—and it’s worth pointing out that the city council’s current membership likely wouldn’t have passed the CEO tax to begin with (Commissioners Dan Saltzman and Nick Fish opposed it). But the uncertainty will also limit what sort of long-term efforts the council can budget for this year. Bureaus have already been asked to shave their existing services.
Maybe that will change if people convince Piwowar to cut it out. Novick says he’s hoping the SEC will be flooded with comments demanding that the nation’s amply paid bosses fess up to how much they make compared to their employees.
“The vast majority of Americans think CEOs are overpaid,” he says. “It’s actually a good opportunity to have a fight.”