President George H. W. Bush’s January 1992 trip to Tokyo will be forever remembered as the time he vomited in his Japanese host’s lap at a fancy banquet.
What made many Americans more nauseated, though, was the stark contrast between the 12 over-paid American CEOs who accompanied Bush on the trade promotion trip and their modestly compensated, yet high-performing Japanese counterparts. When Bill Clinton entered office a year later, he vowed to do something about skyrocketing CEO pay, through a proposed cap on the tax deductibility of executive compensation. But the reform that ultimately passed Congress was watered down, creating an epic loophole that pushed CEO pay even further into the stratosphere.
A new report I co-authored for the Institute for Policy Studies shows how Clinton’s reform has functioned as a perverse incentive for excessive pay and reckless behavior in the industry where such problems are most dangerous — Wall Street. As income inequality continues to rise, Hillary Clinton must fix her husband’s mistake and close this egregious loophole.