Taking Stock: Why Executive Pay Results in an Unstable and Inequitable Economy

Jun 4, 2014

Download the paper by William Lazonick.

Download the paper by William Lazonick.

Over the past three decades, U.S. executive pay has exploded. In 2012, the 500 highest paid executives in Standard and Poor’s ExecuComp database (drawn from company proxy statements) averaged $30.3 million in total compensation, with 42 percent from stock options and 41 percent from stock awards. This amount of compensation is almost three times the level of inflation-adjusted compensation in the early 1990s, when executive pay was already excessive. Market forces did not bestow these riches on top executives; their boards of directors did. Dominated by CEOs of other companies who have a common interest in increasing executive pay, boards have stuffed senior executive pay packages with stock options and stock awards. These same boards have approved multibillion stock buyback programs that enable executives to benefit from the manipulation of their companies’ stock prices.

Key Arguments

  • The American public has long been aware of the excessive compensation of top executives, but insufficient attention has been focused on how the stock-based components of this pay have encouraged CEOs to distribute cash to shareholders at the expense of investment in innovation and provision of secure, well-paid jobs.
  • The estimated $3.6 trillion that Standard and Poor’s 500 companies have spent on buybacks since 2001, in addition to $2.4 trillion in dividends, is a major reason for the ongoing erosion of middle-class employment opportunities in the U.S.
  • Since the early 1980s, the Securities and Exchange Commission (SEC), which is supposed to protect against the manipulation of financial markets, has legalized the use of stock buybacks to manipulate the stock market.
  • The SEC must regulate rather than encourage stock-market manipulation, and boards of directors, which have permitted excessive executive pay and massive distributions to shareholders, instead must represent all economic interests – including taxpayers and workers – whose investments are at risk in the business corporation.

Read: "Taking Stock: Why Executive Pay Results in an Unstable and Inequitable Economy," by William Lazonick.

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Reforming Taxation to Promote Growth and Equity

May 28, 2014

Download the paper by Joseph E. Stiglitz.

Download the paper by Joseph E. Stiglitz.

This white paper outlines concrete policy measures that can restore equitable and sustainable economic growth in the United States, in the context of the country’s recurring budgetary crises. Effective policies are within our grasp, because these budgetary crises are the result of political and not economic failings. Tax reform in particular offers a path toward both resolving budgetary impasses and making the kinds of public investments that will strengthen the fundamentals of the economy. The most obvious reform is an increase in the top marginal income tax rates – this would both raise needed revenues and soften America’s extreme and harmful inequality. But there are also a variety of other effective possible reforms related to corporate taxation, the estate and inheritance tax, environmental taxes, and ensuring that the government gets full value when it sells public assets. This white paper describes the gravity of the economic situation in the United States, but also shows that there is a way out.

Key Arguments

  • The current economic situation in the United States is grave, with extreme inequality, persistently high unemployment, and GDP growth far below potential, to name just a few problems. But the barriers to a solution are political, not economic.
  • Reforms to corporate and personal income taxes will be essential in restoring economic vitality. Examples include implementing financial transaction taxes; increasing corporate tax rates while incentivizing investment in the U.S. and closing loopholes; increasing taxes on rent-seeking; reforming estate and inheritance taxes; and making personal income taxes more progressive.
  • All reforms must be made with the understanding that deficit reduction in and of itself is not a worthy goal. Rather, taxation must be reformed to help grow the economy, improve distribution, and encourage socially beneficial behavior on the part of firms and individuals.

 Read: "Reforming Taxation to Promote Growth and Equity," by Joseph E. Stiglitz.

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Breaking the Cycle of Poverty: Expanding Access to Family Planning

Mar 31, 2014

Download the paper by Ellen Chesler and Andrea Flynn.

Download the paper by Ellen Chesler and Andrea Flynn.

Poverty shapes the lives of an increasing number of American women and their families and has many consequences, including high rates of unintended pregnancy. Conservatives, eager to further dismantle federal programs and defeat the new Affordable Care Act (ACA), have recently rekindled the idea that marriage promotion will reverse rising rates of poverty, unintended pregnancy, and single parenthood. To the contrary, addressing the root causes of poverty requires multiple interventions and far more generous government programs across a range of issues, particularly the expansion of reproductive health and family planning information, care, and services. This paper reviews the recent literature on women’s poverty and health and argues that accessible and high quality family planning services for poor women remain an essential component of poverty reduction. It also looks back at the history of policy debates over this question in the hope of finding a path toward renewed bi-partisan consensus.
 
Key Arguments:
  • Family planning is a fundamental right of women and the foundation of human security.
  • Single women in poverty head a growing percentage of U. S.  households. Addressing their needs requires multiple policy interventions, but none can work if women are denied the agency to make – and act on – well-informed reproductive health decisions.
  • U.S. subsidized family planning programs meet only 54 percent of national need. The ACA will help bridge the gap, although its promise is threatened by legal challenges to the contraceptive mandate. Women deserve insurance coverage for the contraceptive method of their choice, without qualification. 
  • Many low-income women will fall through insurance gaps. Every state should expand Medicaid. The federal government should lift Medicaid’s five-year eligibility requirement for documented immigrants and increase Title X funding to address increased demand for services.
  • We can learn from history. Research since the 1970 adoption of Title X illustrates that access to improved family planning methods promotes responsible decision-making and reduces unwanted pregnancy and abortion. By contrast, abstinence-until marriage and marriage promotion programs advanced by conservatives have failed and been discredited. 

Read "Breaking the Cycle of Poverty: Expanding Access to Family Planning," by Roosevelt Institute Senior Fellow Ellen Chesler and Fellow Andrea Flynn.

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The Role of Labor Market Regulation in Rebuilding Economic Opportunity in the U.S.

Mar 25, 2014

Download the paper (PDF) by Annette Bernhardt

Download the paper (PDF) by Annette Bernhardt

At the start of the 21st century, millions of Americans face a daunting labor market that, absent coherent and sustained policy intervention, will very likely provide them with fewer career opportunities and less economic security than their parents enjoyed. While globalization is often blamed for the deterioration in labor standards, it is domestic service industries where the low-wage problem is most acute. One of the key drivers of precariousness in these sectors is employers’ growing evasion and violation of both legal and normative standards, facilitated by the withdrawal of government’s hand in the labor market. Myriad factors describe this new world of work: the weakening of employment and labor laws; under-resourced enforcement of a host of regulations; production chains that mask legal accountability; the exclusion of groups of workers from legal protection; and a dysfunctional immigration policy. To reinvigorate labor market regulation opportunity, government should: establish a strong floor of labor standards; vigorously enforce that floor; and build a base of good jobs on top of that floor.

Key Arguments:

  • The days of business self-regulation are long gone, or never existed in today’s low-wage industries; therefore, government’s hand must be visible again. 
  • Labor market regulation should play a central role in the U.S. policy response to rising inequality, via three main strategies:
    • strengthening the floor of labor standards (wages, health and safety, and right to organize chief among them);
    • vigorously enforcing that floor (and holding employers accountable for the working conditions they control, whether directly or indirectly); and 
    • leveraging government contracting and grants to build a base of good jobs on top of that floor. 
  • In the current political climate, winning change at the national level will require ratcheting up from state and local policy campaigns to federal reform.

Read "The Role of Labor Market Regulation in Rebuilding Economic Opportunity in the U.S.," by Roosevelt Institute Fellow Annette Bernhardt.

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A Cost-Benefit Analysis of Corporate Political Spending Disclosure

Oct 30, 2013

Download the paper (PDF) by Susan Holmberg

This report provides a generalized cost-benefit analysis of a potential rule promulgated by the Securities and Exchange Commission (SEC) that would require public corporations to disclose corporate political spending.

Download the paper (PDF) by Susan Holmberg

This report provides a generalized cost-benefit analysis of a potential rule promulgated by the Securities and Exchange Commission (SEC) that would require public corporations to disclose corporate political spending. Existing evidence on both the dynamics of corporate political spending and the costs and benefits of SEC mandatory disclosure in general, as well as the use of agency theory, an economic framework that highlights the asymmetric interests and knowledge between corporate managers and shareholders, indicate that the range of potential benefits of corporate political spending disclosure – to shareholders and the market – vastly outweigh the possible costs of compliance to public corporations. 

Key Findings: 

  • Shareholders are becoming increasingly concerned with corporate spending for political purposes. The lack of information available to the public about such spending puts shareholders and the public at enormous economic risk.
  • The costs of requiring the disclosure of corporate political spending would be nominal. For a politically active company to file accurate IRS returns, it must already keep track of its political spending. A new rule requiring disclosure would merely make this internal accounting of corporate political spending available for the investing public.
  • Research also suggests that corporate political spending is not proprietary information and that requiring disclosure will not be a larger burden for smaller firms.
  • The benefits of mandatory disclosure of corporate political spending would be substantial. It would diminish the monitoring costs for shareholders, create better economic incentives for corporate executives, and generate positive externalities for companies that are already in compliance, and provide potential investors with key information for making rational investment decisions.

Read "A Cost-Benefit Analysis of Corporate Political Spending Disclosure," by Roosevelt Institute Director of Research Susan Holmberg.

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The Title X Factor: Why the Health of America's Women Depends on More Funding for Family Planning

Oct 28, 2013

Download the paper (PDF) by Andrea Flynn

The Patient Protection and Affordable Care Act (ACA) represents an unprecedented expansion of the nation’s health care system and an historic investment in the health of American women and girls. The ACA has already improved the lives of millions and will make health care accessible for millions more as rollout continues this year and next.

Download the paper (PDF) by Andrea Flynn

The Patient Protection and Affordable Care Act (ACA) represents an unprecedented expansion of the nation’s health care system and an historic investment in the health of American women and girls. The ACA has already improved the lives of millions and will make health care accessible for millions more as rollout continues this year and next.

Fulfilling the promise of the ACA depends on the continued support and success of existing programs – like Title X, the federal family planning program – that serve as pillars of the nation’s still fragile primary health care infrastructure. Title X provides critical medical care and “wrap around” services for family planning clinics nationwide, enabling them to pay for and maintain facilities, train and hire staff, purchase equipment and supplies, and offer a host of services for specific populations.

Family planning is central to women’s health and social and economic security. Given the tenuous state of the U.S. economy, the vulnerability of women’s health programs in the face of unrelenting political attacks, and the fragility of the social safety net more broadly, public funding for family planning is more critical than ever. Critics may argue that because the ACA meets the needs of many women, Title X is no longer necessary. In fact, the opposite is true. Continued – indeed, increased – funding of Title X will maximize the impact and reach of the ACA and ensure continued care for those who will remain uninsured despite this landmark legislation.

Key Findings:

  • The ACA demands an unprecedented scaling up in the nation’s health infrastructure, and fulfilling the promise of the law will depend on the continued support and success of Title X.
  • The demand for Title X-funded clinics will only increase in coming years as more individuals seek care and those who already rely on safety net providers continue to do so.
  • Despite their coverage status,women will continue to rely on Title X-funded clinics because of the clinics’ experience in and commitment to providing care in a safe, confidential setting.
  • For many women, particularly young women and low- income women, Title X-funded clinics are a critical entry point into the health system. These clinics will be in even greater demand in the coming months as more women obtain coverage and seek a variety of health services.
  • Despite the extraordinary promise of the ACA, many will remain uninsured and for those individuals Title X providers will remain one of the only sources of quality, affordable family planning care.

Read "The Title X Factor: Why the Health of America's Women Depends on More Funding for Family Planning," by Roosevelt Institute Fellow Andrea Flynn.

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Party Competition and Industrial Structure in the 2012 Elections

Oct 21, 2013

Download the paper (PDF) by Thomas Ferguson, Paul Jorgensen, and Jie Chen

This working paper by Roosevelt Institute Senior Fellow Thomas Ferguson, Paul Jorgensen, and Jie Chen analyzes patterns of industrial structure and party competition in the 2012 presidential election. The analysis rests on a new and more comprehensive campaign finance database that catches far more of the myriad ways businesses and major investors make political contributions than previous studies. By drawing on this unified database, the paper is able to show that both major parties depend on very large donors to a greater extent than past studies have estimated.

Download the paper (PDF) by Thomas Ferguson, Paul Jorgensen, and Jie Chen

This working paper by Roosevelt Institute Senior Fellow Thomas Ferguson, Paul Jorgensen, and Jie Chen analyzes patterns of industrial structure and party competition in the 2012 presidential election. The analysis rests on a new and more comprehensive campaign finance database that catches far more of the myriad ways businesses and major investors make political contributions than previous studies. By drawing on this unified database, the paper is able to show that both major parties depend on very large donors to a greater extent than past studies have estimated.

The paper outlines the firm and sectoral bases of support for the major party nominees, as well as for Republican candidates who competed for the GOP presidential nomination. The paper shows that President Obama’s support within big business was broader than hitherto recognized. A central conclusion is that many major companies in the sectors most involved in the recent controversies over surveillance were among the president’s strongest supporters. The paper also analyzes patterns of business support for the Tea Party in Congress, showing that certain parts of business are more supportive of Tea Party candidates than others. The role of climate change, financial regulation, and other issues in the election is discussed at length.

Key Findings:

  • Existing data sources used for studies of campaign finance have a variety of serious flaws.
  • As a result, the degree to which major parties’ presidential candidates depend on very large donors has been underestimated and the role small donors play exaggerated.
  • The relation between the money split between the parties and the proportion of votes received by their candidates in House and Senate races appears to be quite straightforward.
  • Firms and executives in industries strongly affected by proposed regulations limiting greenhouse gas emissions heavily backed Mitt Romney. So did much, but not all, of finance.
  • President Obama’s support within big business was broader than hitherto recognized. His level of support from firms in telecommunications and software was very strong indeed, sometimes equaling or exceeding Romney’s. Many firms and sectors most involved in the recent controversies over surveillance were among the President’s strongest supporters.
  • Republican candidates showed sharply different levels of contributions from small donors; President Obama’s campaign, while heavily dependent on large donors, attracted more support from small donors than did his Republican opponent.
  • Big business support for Tea Party candidates for Congress was substantial, but well below levels for more mainstream Republicans. Many of the same sectors that strongly supported Romney also backed Tea Party candidates. Backing for Tea Party candidates by Too Big To Fail banks ran above the average of business as a whole by every measure.

Read "Party Competition and Industrial Structure in the 2012 Elections: Who's Really Driving the Taxi to the Dark Side?" by Roosevelt Institute Senior Fellow Thomas Ferguson, Paul Jorgensen, and Jie Chen.

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Policy Note: Can Say-on-Pay Curb Executive Compensation?

Sep 25, 2013

Download the policy note (PDF) by Susan Holmberg

In a new policy note, Susan Holmberg presents the key economic research on the measurable impacts of Say-on-Pay in both the U.S. and the U.K., the latter of which has had a version of Say-on-Pay in force for much longer.

Download the policy note (PDF) by Susan Holmberg

Of the few provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act that address governance of excessive executive compensation, the Say-on-Pay provision is the only one that the U.S. has actually implemented. Critics argue that Say-on-Pay has been a colossal failure in the three years that it has been in effect, and that very few shareholders feel strongly enough about CEO pay to vote against CEO pay packages.

In a new policy note, Susan Holmberg, Director of Research at the Roosevelt Institute, presents the key economic research on the measurable impacts of Say-on-Pay in both the U.S. and the U.K., the latter of which has had a version of Say-on-Pay in force for much longer. Drawing on this evidence, this paper argues that while Say-on-Pay alone will not slow the rise of CEO pay, the policy does have some measurable effect on CEO pay practices. Further, Say-on-Pay can enhance corporate governance practices by improving lines of communication between companies and their shareholders. Along with Say-on-Pay, it is critical that we pursue a range of policies that address the problems of executive compensation.

Read the policy note: "Can Say-on-Pay Curb Executive Compensation?" by Roosevelt Institute Director of Research Susan Holmberg.

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Policy Note: Will Crowdfunding Kickstart an Investment Revolution?

Sep 5, 2013

Download the policy note (PDF) by Georgia Levenson Keohane

In a new policy note, Roosevelt Institute Fellow Georgia Levenson Keohane examines the policy and political implications of peer-to-peer financing. In recent years, crowdfunding has emerged as a financing model that allows smaller funders to invest in projects and organizations in their early stages – particularly those that would otherwise struggle to obtain capital. Peer-to-peer funding experiments first emerged in the nonprofit sector, but have since expanded to the realms of for-profit investment and political activism.

Download the policy note (PDF) by Georgia Levenson Keohane

In a new policy note, Roosevelt Institute Fellow Georgia Levenson Keohane examines the policy and political implications of peer-to-peer financing. In recent years, crowdfunding has emerged as a financing model that allows smaller funders to invest in projects and organizations in their early stages – particularly those that would otherwise struggle to obtain capital. Peer-to-peer funding experiments first emerged in the nonprofit sector, but have since expanded to the realms of for-profit investment and political activism. The proliferation of crowdfunding models and uses requires a nuanced policy response, one that balances the imperative to support the growth of small businesses and new jobs with safeguards for investor protection.

Read the policy note: "Will Crowdfunding Kickstart an Investment Revolution?" by Roosevelt Institute Fellow Georgia Levenson Keohane.

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Policy Note: Can Social Impact Bonds Unlock Private Money for Public Goods?

Aug 5, 2013

Download the policy note (PDF) by Georgia Levenson Keohane

In a new policy note, Roosevelt Institute Fellow Georgia Levenson Keohane analyzes a new model of social entrepreneurship, which utilizes private funds to solve social problems. Social impact bonds finance preventative programs that the government does not have the budget to fund, but raise questions about whether a return-on-investment model is really the best way to approach social needs and if the funding sources affect the work being done.

Download the policy note (PDF) by Georgia Levenson Keohane

In a new policy note, Roosevelt Institute Fellow Georgia Levenson Keohane analyzes a new model of social entrepreneurship, which utilizes private funds to solve social problems. Social impact bonds finance preventative programs that the government does not have the budget to fund, but raise questions about whether a return-on-investment model is really the best way to approach social needs and if the funding sources affect the work being done.

Read the policy note: "Can Social Impact Bonds Unlock Private Money for Public Goods?" by Roosevelt Institute Fellow Georgia Levenson Keohane.

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