Ryan Maness, Lauren Doroghazi, and Jay Wimberly contributed to research for this blog post.
After a city ordinance targeting CEO compensation passed in Portland, Oregon, at the end of last December, we've seen 10 bills introduced in seven states that would impose sanctions on businesses if executive pay is deemed “too high.” In most cases, these bills evaluate CEO pay based on some type of “pay ratio,” comparing executive compensation to the average or median pay of the firm's other employees.
Check out the map below to see which states and localities are considering legislation targeting CEO compensation.
The Portland ordinance is described as follows (pulled from an impact statement circulated about the ordinance):
Under this proposal, a publicly traded company that is doing business in Portland will be subject to a surtax of IO percent of its base Business License Tax liability if it reports that the ratio of compensation for its chief executive officer and median worker is equal to or greater than 100: 1 but lower than 250: 1. The surtax rises to 25 percent of base Business License Tax liability if the company reports a ratio equal to or greater than 250: 1. This means that if a company pays its median worker nationally $50,000/year, it could pay its chief executive officer up to $4.9 million/year before it would be subject to a 10 percent surtax of its existing business license tax liability. The chief executive officer could be paid up to $12.4 million/year before paying the higher surtax of 25 percent.
According to Bloomberg BNA, a measure similar to the Portland ordinance will be considered in San Francisco, California, as well.
Since the start of the 2017 legislative session, we've seen legislation similar to the Oregon ordinance introduced in seven states. Most of these bills involve an additional fee or surtax if some measure of compensation ratio exceeds a certain amount. Other states approach it differently — a bill in Connecticut would withhold tax incentives if the pay ratio exceeds a given amount, a bill in Montana revokes property tax exemptions if executive compensation exceeds a certain dollar threshold, and another bill in Connecticut would restructure the current corporate income tax to make rates dependent on pay ratio.
The table below outlines details of each of the CEO compensation bills we have identified, including a brief summary. Did we miss one in your state? If so, please let us know!