Why Obama, Congress must curb CEO pay

First, Congress should immediately grant public shareholders the rights, on their own, to call a shareholders' meeting to vote out the current board and to render an advisory vote on executive compensation — rights that they don't currently have. Much better than any other similar measures contemplated or previously adopted, these three rights, which are already in place and working well in Britain, would align shareholder and management interests as to both governance and executive compensation.

Second, Congress should establish a ceiling for individual executive compensation as a reasonable multiple of average employee compensation, and penalize through the corporate income tax code and/or otherwise those companies that elect to pay in excess of that multiple.

Third, Congress should close the loopholes that currently allow the wealthiest Americans to use offshore tax schemes that cost our Treasury $70 billion in taxes each year, and it should aggressively step up tax enforcement to capture the 30 percent or so of earnings from selling investments that currently goes unreported each year.

Fourth, Congress should tax the "carried interest" now being earned by private equity and hedge fund managers at the ordinary-income tax rate of around 35 percent, rather than at the much lower capital gains tax rate of 15 percent. Carried interest is just a form of performance fee, and like every other performance fee or bonus it should be taxed as ordinary income — otherwise it is just another example of excessive and unfair executive compensation.

And fifth, Congress should continue to oversee the compensation practices of any entity that has or relies on federal government guarantees. To this point, particular compliments should go already to those in Congress and to the New York state attorney general for their efforts to recover the excess compensation that recently went or is still scheduled to go to AIG executives.

If Congress enacts these five measures, then many of the oppressive breakdowns in our economy will be mitigated — from the grossly un-progressive tax outcomes to the insensitive employee practices to the larger than necessary trade and federal deficits. And the fairer and more balanced sense of corporate responsibility which so honorably distinguished our country for most of the 20th century will be restored.

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