Why was Section 162(m) of the Tax Code such a failure?

[Maxwell]

https://www.propublica.org/article/the-executive-pay-cap-that-backfired

In the 1990s, President Clinton and Congress signed a bill that pushed for capping deductions on CEO's, making only $1,000,000 deductible while requiring anything beyond that to be "performance-based". It was done to restrain the growth of executive pay and make them more responsible for the company in question. Since then, however, Executive Compensation has grown dramatically and it seems like CEOs have become less accountable to the public.

In my mind, the limiting of the deduction only opened up Corporate Executives to start being paid via Stock Options, and those stock options in the company made them more vulnerable to the expectations game, where a lot of corporate fraud (especially in cases like WorldCom) is perpetrated.

[Indy Texas]

Who decides how much a CEO gets paid? The board of directors.

What sort of people are on the board of directors of an American company? CEOs of other companies.

It's a very incestuous, self-serving arrangement.

And when you have an activist investor like Carl Icahn step in, they're usually less concerned with CEO pay and more interested in getting the company to do a merger/spin-off that will "unlock shareholder value."

As for the CEOs themselves, we've generally moved away from the mid-20th century system of the CEO being a longtime employee of the company (vertical hiring) to the current system where elite business school MBA programs serve as a sort of assembly line for churning out people who are deemed the only ones who can be CEOs and who will, over the course of their career, move between several different companies in some sort of executive position. Meg Whitman (Procter & Gamble --> Hasbro --> eBay --> Hewlett Packard --> Hewlett Packard Enterprise) is an example of the current system. Jack Welch (worked for GE for decades in various positions before eventually becoming CEO) is an example of the old system.

[🦀🎂🦀🎂]

One solution could be to make employee elected members of boards a requirement.

[Mr.Phips]

https://www.propublica.org/article/the-executive-pay-cap-that-backfired

In the 1990s, President Clinton and Congress signed a bill that pushed for capping deductions on CEO's, making only $1,000,000 deductible while requiring anything beyond that to be "performance-based". It was done to restrain the growth of executive pay and make them more responsible for the company in question. Since then, however, Executive Compensation has grown dramatically and it seems like CEOs have become less accountable to the public.

In my mind, the limiting of the deduction only opened up Corporate Executives to start being paid via Stock Options, and those stock options in the company made them more vulnerable to the expectations game, where a lot of corporate fraud (especially in cases like WorldCom) is perpetrated.

The "performance based" exception made that law completely toothless.  Exceptions create loopholes.

[Maxwell]

https://www.propublica.org/article/the-executive-pay-cap-that-backfired

In the 1990s, President Clinton and Congress signed a bill that pushed for capping deductions on CEO's, making only $1,000,000 deductible while requiring anything beyond that to be "performance-based". It was done to restrain the growth of executive pay and make them more responsible for the company in question. Since then, however, Executive Compensation has grown dramatically and it seems like CEOs have become less accountable to the public.

In my mind, the limiting of the deduction only opened up Corporate Executives to start being paid via Stock Options, and those stock options in the company made them more vulnerable to the expectations game, where a lot of corporate fraud (especially in cases like WorldCom) is perpetrated.

The "performance based" exception made that law completely toothless.  Exceptions create loopholes.

That is very true.