I believe that it is critical to compensate executives accordingly if they are responsible for the growth and development of a company. Executives are put in their positions for a reason, and they are key components of the business in leading and motivating the other employees. The divergence of pay between employees and executives is alarming, but often times the difference in pay is due to stock compensation. Executives who have been a part of the company for a long time may have large amounts of company stock that can increase their overall income and create that divergence of pay between executives and employees. There are issues however when the company is not performing well, yet the executives are getting way more than a typical employee. I believe that executive pay can be excessive in situations where the company is not growing or producing profits, but in situations where the executives are key cogs in the business and they are growing and producing profits, I believe it can be justified.
The rise of the stock market has definitely increased the divergence of executive pay and employee pay. Average employees may not have stock compensation so they are solely relying on their salaries. Executives can have bigger salaries and huge compensation packages in the form of stocks. If the company is performing well and the stock is rising, the potential growth of their compensation can be scaled. In addition I believe that executive pay is rising due to the competitive nature of business today. There are always competitors that are looking to take away your business so companies may feel obligated to pay a premium for their top talent. Top executives that are loyal to a company are harder to find than typical employees who may be replaced easily.
I believe that there should be some change to the executive compensation so that there is not such a divergence even if the company is not performing well. It is easy to give praise and compensation to the executives when things are going well, but it should work the same way in reverse if the company is not performing well. When the company is not meeting expectations there should be a close look at the executives and they should be the first ones to give up part of their salaries if they are not executing on the companies goals. Stock compensation also should be offered more regularly to employees so that they can experience the added benefits if they choose to enroll and believe in the future of the company. Each employee plays a role in the company so I believe all employees should have an opportunity to have some skin in the game.
