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POLITICS : CEO Pay Raises Rise to Level of Campaign Issue : Some executives make 85 times more than average workers. Clinton emphasizes inequities.

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TIMES STAFF WRITER

At a time when corporate profits are down, productivity is lagging and companies are laying off workers by the tens of thousands, does it make any sense to reward the typical corporate chief executive by paying him more than 85 times as much as his average worker?

Increasingly, the question of just how well compensated the nation’s top executives should be is making its way into the political debate. Arkansas Gov. Bill Clinton has emphasized the issue in his bid for the Democratic presidential nomination, and at least two bills addressing it have been introduced on Capitol Hill.

President Bush, although insisting that the federal government should not be in the business of setting corporate salaries, nonetheless said last week that boards of directors “should be looking very carefully at these matters.”

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Many see in these developments a new momentum behind an issue that has rankled workers and shareholders for years.

The debate goes at least as far back as Plato, who told Aristotle that no member of a community should be earning more than five times what the lowest-paid worker made. Management consultant Peter Drucker has suggested that the right ratio is about 20 times.

In recent years, the pay of U.S. chief executives has risen drastically, even as the firms that employ them have slipped further behind their foreign competitors.

Graef S. Crystal, a UC Berkeley business school professor who has written a book on the subject, surveyed 10 leading companies in which the chief executives had held their posts at least 17 years. In the mid-1970s, the average CEO in his study was earning about 34 times as much as the typical worker in his employ. By the late 1980s, that figure had reached 110 times.

“Lest you think maybe the higher pay was a function of much higher performance . . . their performance was going down at the same time their pay was going up,” Crystal said.

Some argue that the amount being spent on astronomical executive compensation hurts U.S. ability to compete globally. Certainly, the figures at U.S. corporations appear out of line with what similar companies overseas pay their top executives. Crystal estimated that CEOs at Japanese firms typically make about 17 times as much as their average worker; German chief executives make about 21 times that amount.

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Clinton, among others, has complained that the federal government is rewarding the excesses of U.S. firms by allowing them to treat executive pay as fully deductible. The Arkansas governor proposes that those deductions be limited, although he has not specified where the line should be drawn.

Rep. Martin Olav Sabo (D-Minn.) has gone even further, introducing a bill that would disallow business deductions for executive salaries that are more than 25 times the wages of the lowest-paid worker in an organization. That ratio, he noted, is approximately the relationship between the salary of the U.S. President and the minimum wage.

Sen. Carl Levin (D-Mich.) has taken a different approach, one that would give shareholders more say in determining compensation levels.

Now, executive pay is set by a company’s board of directors--who themselves are nominated and paid, often handsomely, by that firm’s management.

Under current Securities and Exchange Commission regulations, when a shareholder holding $1,000 worth of stock for more than a year submits a proposal to a company, the firm is required to put it to a vote by all the stockholders. However, the commission has declared that matters involving executive compensation are an exception to this rule.

Levin said his legislation “would reverse this policy.”

It would also require a clearer disclosure of total executive-compensation packages--figures that often are scattered throughout proxy statements that are hundreds of pages long. Levin’s bill would require that all the information be listed on a single chart.

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