Saturday, November 21, 2015

Include executive compensation in corporate tax stories

Whenever reporters write of corporate executives' complaints about  high corporate taxes, editors should require them to include the executives’ annual compensation…just to put things in perspective.

One of the biggest  “taxes” around comes through exorbitant executive compensation. The big salaries and benefits tax shareholders and ultimately middle-class taxpayers.

How happy these executives are to boost our taxes to pay for their compensation. Those taxes have gone up and up and up as executives are paid more.

Executive compensation is a business tax write-off. In short, Lithia’s taxes to the state are lower as  it pays its executives more.

And the higher the write-off and executive compensation, the more we taxpayers pay to make up for it.

On today’s Oregonian front page, we have one John North, the chief financial officer of Ashland-based Lithia Moters, complaining that a proposed higher state corporate tax would drive Lithia and other "low margin" businesses out of the state. That, of course, would cost jobs here etc.

In the same story, we have Ken Thrasher, a former Fred Meyer CEO, quoted to similar effect. Groceries are also considered "low-margin."

Question: What is Mr. Thrashers, retirement package from Fred Meyer? What is it compared to that of a checker at Fred Meyer? What does the current CEO at Fred Meyer make? Could Freddie's margins be made less "low" if executives were paid less?

Question: What is Mr. North’s own salary, particularly compared to those who work on the floor or the backshops in Lithia’s dealerships. What is the compensation for Mr. North’s own boss and other top executives?

Part of the solution to the tax-revenue problem is that executive compensation above a set amount shouldn’t be allowed as a tax write off. In that way, corporate taxes would be “raised” and shareholders would presumably benefit.

Or if corporations still want the compensation write off, they should compensate workers more, in part addressing the pressing problem of gross pay inequity in corporate America.

A ratio of executive salary to the pay of the average worker could be set in law. Something like five-to-one. Nationally, the ratio now is something like 300 to 1.

Suppose the average worker at Lithia makes $50,000. Under a new law, Mr. North and others in the executive suite would not be able to make more than $250,000.

With their financial know-how, executives should manage to get by on that.

Could you? Could I?

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Monday, November 16, 2015

MODA: a local case study in exorbitant executive compensation

Any CEO who accepts or demands exorbitant compensation, particularly in comparison to the compensation of the company's line workers, should be considered unfit to lead.

Such grotesque inequitable compensation should be outlawed.

Consider the case here in Portland of the publicly-supported Oregon Health Sciences University (OHSU), its questionable financial dealings with the private MODA Health Plan and the compensation of MODA CEO Robert Gootee.

A little background:

The Oregonian reported on Nov. 6 that OHSU lent MODA Health Plan, $50 million at the end of last year. Suffice to say that the two institutions do a lot of business together.

So much so that MODA, according to OHSU officials, is yet another one of those private institutions “too big to fail.” And so the public’s subsidy money gets shoveled to MODA, via OHSU.

It turns out that if MODA does fail, we, fellow taxpayer take the hit. OHSU, Portland’s largest employer, is really, REALLY too big to fail.

OHSU’s board of directors approved the loan last December. A month after the vote, OHSU president Joe Robertson joined MODA’s board. He was paid $26,000 for his services, according to the Oregonian, before leaving the board in two months ago, when MODA’s most recent financial problems came to light.

The paper also reported that Robertson donated his MODA fees to OHSU. One wonders what the money will be used for. Part of another loan to MODA perhaps?

The Oregonian story is long at 36 paragraphs. But it’s not until paragraph 30 that we find out that in 2013 MODA’s CEO Robert Gootee was paid $13 million. Of that $8.9 million was a “one-time” payment for “a terminated retirement plan and deferred compensation he has not yet received.” But in 2012, Gootee received $10.4 million 2012.

Why didn’t Gootee simply drop his shameful compensation to help MODA financially?

The Oregonian apparently didn't ask for an explanation or was refused one, but reporter Jeff Manning does write, “OHSU, meanwhile, still collects millions of dollars a year from Oregon taxpayers. Last spring, weeks after the MODA loan, the Oregon Legislature approved another $270 million for the institution,” which is a public corporation.

The lead to this story could easily have been: “Oregon taxpayers helped OHSU lend health insurance company MODA $50 million last year, one year after, MODA paid its CEO $13 million.”

Kudos to The Oregonian and Manning for revealing the the taxpayer-backed loan, but a juicy rotten tomato for not spotlighting Gootee compensation package…and delving into the question of conflicts of interest and a culture in which executive compensation and greed come first.

Footnote: The MODA in question is the same outfit that has slapped its name on what was once “The Rose Garden." The cost of the glitzy naming rights has been put at $40 million over 10 years.

MODA officials say the number is too high but won’t disclose what it is.

One wonders why....

Update: Today it was reported that OHSU will convert its $50 million loan into a a 25 percent stake in MODA Health Plan.  Question: what will it pay the "new" MODA's CEO?

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