The pandemic wrought misery for tens of millions who lost jobs or saw a reduction in hours — but for top-paid CEOs, it was a banner year.
Eight of the highest-earning executives each received compensation last year worth more than $100 million. In 2019, only one executive reached that threshold, according to a survey conducted by consulting firm Equilar for The New York Times.
In a new interview, former Xerox (XRX) CEO Ursula Burns sharply criticized the astronomical CEO pay amid the pandemic, noting that executives who enjoy sky-high compensation and low tax bills take advantage of legal avenues that require structural change.
"That's abuse," she says. "Some of it is legal abuse."
Burns, who became the first Black woman to lead a Fortune 500 company when she took over Xerox in 2009, said she supports a "reasonable standard" for CEO compensation but opposes reforms that mandate a ratio between CEO and employee pay at a given company.
"This problem [of] taxes, CEO pay is not the buildings or the institutions, it's the structures," she says. "It should not be possible for you to make $15 billion and pay $5 taxes. I know I'm exaggerating on both ends, it just should be figured out."
"It's these people not cheating the system — they are paying exactly the taxes that the system [says] that they should pay or could pay," adds Burns, author of a new book entitled "Where You Are Is Not Who You Are: A Memoir." "So this is not criminal."
Many of the nation's wealthiest CEOs use legal tax-avoidance methods that allow them to pay low or no income taxes in some years, according to an investigation released by ProPublica earlier this month.
The investigation calculated a "true tax rate" based on the amount in taxes paid by a billionaire and the amount his or her wealth grew over a given period. By that measure, from 2014 to 2018, Berkshire Hathaway (BRK-B, BRK-A) CEO Warren Buffett paid a 0.10% tax rate, Amazon (AMZN) CEO Jeff Bezos paid 0.98%, and Tesla (TSLA) CEO Elon Musk paid 3.27%, the investigation found.
The revelations about tax avoidance prompted calls for reform from progressive Senators like Elizabeth Warren (D-MA) and Bernie Sanders (I-VT), as well as acknowledgment from the Biden administration that flaws in the tax code need to be addressed.
Biden has called on corporate America to pay its "fair share," referring to the tax hike embedded in his initial $2 trillion infrastructure proposal that would raise the rate for corporations from 21% to 28%. Prior to a tax overhaul passed during the Trump administration, the corporate tax rate was 35%.
In addition, Biden has proposed tax hikes on the wealthy that would pay for his $1.8 trillion American Families Plan, which includes universal pre-school, two years of free community college, and a host of other initiatives. The plan would increase the top individual income tax rate to 39.6% from 37%, tax capital gains as normal income for households making more than $1 million, and close the carried interest loophole.
Pushback against Biden's overall tax plan has come from some prominent billionaires and chief executives. JPMorgan Chase (JPM) CEO Jamie Dimon warned lawmakers on Capitol Hill last month that the increased taxes "would be detrimental to a lot of companies." Powerful business trade groups also have opposed the proposed tax increases.
Speaking to Yahoo Finance, Burns said she supports setting a standard for CEO compensation and ensuring executives cannot get away with paying minimal taxes. But she said she opposes a proposal backed by 100 House Democrats last year that would cap compensation by mandating a ratio between CEO and employee pay at a given company.
"This is the most ridiculous thing I've ever seen in my life, because people figure out a way to game those kinds of things," she says. "You outsource all your low-paid employees, and all your employees are high-paid employees."
"We have to have some kind of expectation, standard guidance, something," she adds. "I don't think the government has to run it. But we have to have better expectations than we do today."
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