How some CEOs are trying to make a killing off the fiscal cliff by Eleanor Bloxham @FortuneMagazine November 26, 2012, 4:41 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons FORTUNE — What should boards pay CEOs for anyway? A new study raises questions about the structure and size of CEO pay that deserve answers — and fast. An analysis from the Institute for Policy Studies’ (IPS) released earlier this month shows that CEOs will reap huge personal moolah if a fiscal cliff campaign some of them are undertaking is successful. According to the report, the Fix the Debt campaign “has raised $60 million and recruited more than 80 CEOs.” The paper highlights three elements of the campaign’s agenda: repatriation of foreign profits tax free, maintenance of the Bush tax cuts, and offsets through reductions to Social Security, Medicare, and Medicaid benefits. The IPS report explains why CEOs could be personally interested in the campaign’s proposal to rob citizen Peter to pay CEO Paul. Jon Romano, a spokesperson for Fix the Debt, did not respond to requests for comment. MORE: Wells Fargo CEO: Why Americans are saving so much The IPS study shows that GE GE , Microsoft msft , Merck mrk , and Cisco csco have nearly $250 billion in offshore income. By allowing on-shoring tax free, as the Fix the Debt campaign advocates, the analysis shows that the government’s deficits could increase by $85 billion while corporate earnings would swell by a similar amount — just for those four companies. Like many other firms, the annual proxy filings of GE, Microsoft, Merck, and Cisco cite corporate earnings as one of the primary justifications for CEO bonuses. Some, but of course not all, of any earnings benefit to the company would likely flow to each CEO’s personal bottom line. Extensions of the Bush tax breaks enhance CEO net worth more directly. According to the IPS analysis, five of the CEOs involved in the campaign earned $378 million in 2011 taxable pay. With compensation that large, assistance from the Bush tax plan saved them (and cost the country) $30 million in government contributions last year alone. Meanwhile the proposal to cut Social Security, Medicare, and Medicaid would help make up the difference for the lost revenues in the other two recommendations. Clearly, those cuts could harm corporations down the road by dampening the spending of consumers who receive Social Security or are kept alive and well because of Medicare or Medicaid (and, in some cases, both programs). These cuts could negatively affect the whole economy, not just one company. That seems like something CEOs might want to avoid. But because of the perverse nature in which today’s incentive systems operate, any negative economic consequences could end up personally benefiting CEOs. As a general matter, boards neither quantify nor hold CEOs accountable for their solo or collective influence on poor economic conditions. So CEOs get a free pass there. But boards often do consider the health of the economy when they set goals for their chief executives. If the economy weakened, CEOs would likely have lower performance hurdles to clear. Further, economic volatility could actually improve paydays for CEOs by lowering the prices of stocks and options at the time of award. If prices drop, CEOs often get larger pools of stock and options because their value is depressed. When prices subsequently rise, CEOs cash in. While the idea of cost shifting and actually paying CEOs bonuses for wealth transfers from others may seem novel, it isn’t new. In fact, the approach is already a part of the way many boards pay CEOs. Today, many boards pay CEOs for earnings, regardless of the quality of the actions taken to achieve them. Some firms make it a regular practice to take benefits and jobs away from employees to create a temporary profit lift that raises CEO pay. Layoffs, hiring, wage freezes, machetes to pension plans, and slashes to health benefits: all additions to earnings count alike when it comes time to determine a CEO’s bonus. MORE: Why BP is not a takeover target But boards need to discriminate. Boards should pay CEOs well for building a business and creating jobs that add value. They should not dole out bonuses for actions that represent a short-term benefit that will not produce continuing returns — and could be harmful in the long-term. To do this, though, boards would have to do something many aren’t doing today: understand long-term economic value by looking behind the earnings numbers to the impacts of the company’s actions on stakeholders and the economic environment. Such a review would have a powerful benefit. CEOs and boards would better understand the long-range effects of possible decisions before making them. Layoffs, as an example, don’t create sustainable value. At their core, they represent a failure of a board to hire a CEO who can execute on the board-approved strategy. Yet not recognizing their own culpability, board members will smile and say they want their executives to reduce headcount rather than hire. Too many board directors see workers simply as a cost. But this thinking is misguided at best. Although wages show up on the income statement as an expense, workers are not a cost at well-managed firms. Presumably, a smart board doesn’t appoint a CEO who hires workers that add no positive economic value. Indeed, the directors I speak with are generally unanimous in their support of the mantra, “no hires if there is no economic return.” But not enough company leaders examine their actions on an ongoing basis. Not enough ask, “If we have too many people, where did we — the board and management — go wrong?” Certainly, putting people to work just because is not on many company agendas. The IPS study states that the “63 public companies in the Fix the Debt campaign” currently have more than “$480 billion in cash on their balance sheets, enough to pay living wage salaries for 10 million workers.” MORE: Are banks still ‘too big to fail’? But the pay elephant in the room is this: why pay mega-millions to large company CEOs who can’t think of profitable ways to build their businesses and put people to work? Finding people who can go to DC and argue on behalf of their personal interests shouldn’t be that expensive. Boards need to focus CEO attention on creating sustainable wealth for their companies in a way that benefits the economy. Robbing your stakeholders won’t do that. Providing them something of value will. Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board advisory firm.