Proposal Seeks To Make California The Artificer And Enforcer Of Caps On Executive Compensation


Earlier this month, Secretary of State Debra Bowen announced that the proponents of an initiative measure could begin collecting petition signatures for their measure.  If this measure makes it on to the ballot and is approved by the voters, it would prohibit nonprofit hospitals, hospital groups, and hospital-affiliated medical foundations and physicians groups from paying annual compensation (salary, perks, paid time off, bonuses, stock options, etc.) or providing severance packages to executives, managers, and administrators in an amount exceeding the salary and expense allowance of the President of the United States (currently $450,000).  The measure would also require annual public disclosure of ten highest-paid executives and five largest severance packages.  The law would be enforced by the Attorney General or by “taxpayer litigation”.  Violators could face fines, revocation of tax-exempt status, and appointment of Attorney General representative to board of directors.

Of course, the idea of state imposed wage caps is not new. For example, the English parliament in 1562 enacted the Statute of Artificers, 5 Eliz. 1 c. 4, which set wages for skilled workers. Both employers and employees could be punished for paying or receiving excessive wages.

Reaching even farther back into history, the Roman Emperor Gaius Aurelius Valerius Diocletianus (aka Diocletian) issued a price and wage law in 301 C.E. entitled Edictum De Pretiis Rerum Venalium (literally, the Law Concerning the Prices of Things Sold, but usually translated as The Edict on Maximum Prices).  According to one contemporary source, Diocletian’s legislation was not much of a success:

. . . legem pretiis rerum venalium statuere conatus est; tunc ob exigua et vilia multus sanguis effusus, nec venale quicquam metu apparebat et caritas multo deterius exarsit, donec lex necessitate ipsa post multorum exitium solveretur.

He [Diocletian] tried to establish a law about the prices of things sold; then much blood was spilt on account of paltry and trifling things, and it was apparent that because of fear nothing was for sale and the scarcity burned much worse, until the law by necessity after much destruction was dissolved.

Lucius Caecilius Firmianus Lactantius, De Mortibus Persecutorum Ch. 7 (my translation).

The proponents of the California will need to collect 504,760 signatures by June 2, 2014 in order to get their proposal on the ballot.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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