Progressive Legislators, Spun Research, and Dumb Legislation

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Rhode Island legislators who submit legislation that is indistinguishable from far-left opinion essays, complete with spun research, should concern the people who elected them.  Such is the case with Providence Democrat Aaron Regunberg’s H5141.

The idea is terrible enough.  Regunberg and his cosponsors want to add to the state’s tax burden for corporations by charging them an additional 10-25% surtax on their corporate income taxes if their CEOs have high pay ratios compared with their employees.  The idea is so bad that it isn’t even worth getting into policy details like how this might affect corporations with employees in and out of the state.

Perhaps the key point comes in the “declaration of purpose and findings” section.  The 26-year-old legislator with no apparent experience other than being a student activist and a legislator believes it is his role as an elected official to come up with methods for “penalizing or rewarding corporations” based on criteria he believes to be important.  The value of a degree at Brown University should be in serious doubt if its students can’t see how totalitarian — how fascist — that belief is, and this graduate wants to put it explicitly into Rhode Island law.

Because I can’t resist data and arguments about its implications, this “finding” caught my eye:

Research indicates that corporations with high chief executive officer-worker pay ratios have lower employee morale and lower shareholder returns compared to corporations with lower ratios. For example, the job site Glassdoor analyzed one million two hundred thousand (1,200,000) chief executive officer ratings from current and former employees, finding that higher chief executive officer compensation is statistically linked with lower approval ratings for those executives.

Note, first of all, the unbelievably overstated premise that Regunberg’s evidence comes nowhere near proving.  Even the Glassdoor study is firm on the point that “the correlation between executive compensation and CEO approval is not simple.”  I’d translate that to mean that the finding is junk, but it’s a headline-grabber, so they wanted to leave it in their report for promotional reasons.

One of the reasons it’s junk is that the measure of CEO compensation is “total CEO compensation as a percentage of company assets.”  A percentage or ratio has two components.  In other words, in exactly the same degree to which “CEO compensation” inversely correlates with low approval ratings, company assets directly correlate with low approval ratings (that is, smaller companies correlate with less satisfaction).

The top end of the chart is around 5.5%, so a CEO of a relatively small, $1 million company would be considered highly paid for making $55,000 per year, while a CEO making $10 million in a half-billion-dollar company would be in the happy sweet spot of the curve.

If this is the sort of intellectual substance dictating policy in Rhode Island, we’re in big, big trouble.  Actually, as Willy Wonka said, “Strike that; reverse it”:  Maybe the reason we’re in big, big trouble is that our state’s policies have been too long set based on a toxic mix of ignorance and self-interest.

 

 

Postscript

So as not to let the other top sponsors off the hook, here are the five whose names are on the bill:

  • Aaron Regunberg, Democrat, Providence, District 4
  • Scott Slater, Democrat, Providence, District 10
  • Jean Philippe Barros, Democrat, Pawtucket, District 59
  • Michael Morin, Democrat, Woonsocket, District 49
  • Mary Duffy Messier, Democrat, Pawtucket, District 62


  • Monique Chartier

    Disturbing how out of touch with reality this bill is.

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