Let’s discuss a CEO first and foremost. What is the actual job description? They manage the companies overall operations. This can have a wide range of things associated with it, but in general, it’s more of planning and direction. For example, choosing to start a new R&D project or restructuring the marketing department. Qualifications to actual become a CEO, are more on the management and leadership side. As a CEO is in charge of a lot of people, they need to have experience and understanding in those fields.

What factors contribute to the large pay difference between executive level officers and other workers?

The issue is a lot more complex than simply, “oh these people started the company so their pay is way higher”. According to an article released by Gretchen Gavett, on Harvard Business Review, everything regarding the countries economy actually comes into play here. From the perspective of the country’s level of development, down to the social hierarchy of its people. Executive pay changes greatly based upon these.

One statement made in the article, “The development of the banking sector. The more concentrated the sector is, the more that should ‘monitor and control firms and thus constrain CEO power and pay'”. According to this statement, ideally, when banks have more power the high level players will all end up restricting each other from becoming too greedy and gouging everyone.

Often times, there are people arguing about the massive amounts of money brought in by the executive level people. Some claim that they make way too much. In a sense, they could be correct. High level people will often take private jets for corporate meetings, or blow wild, frivolous amounts of money on trashy art when that cash could be better spent on charity.

Another perspective, is where does the money come from to expand the business? Who takes on all the risk? There’s a saying for high risk, high reward. If there’s no reward then why take the risk? Besides already massively successful businesses, executives of smaller business will often put everything they have on the line to grow themselves. The workers do not take on that kind of risk, they can find a job elsewhere if needed.

Personally, I do not believe changes should be made. If workers believe that their compensation is unjust, then they will flee to the competitor. That’s the invisible hand of the market playing it’s most important role. An issue would arise in the event that there are no competitors within the sector. Monopolies hold more danger than the pay of a CEO ever could.

Bibliography:

Gavett, G. (2022, November 1). The factors that lead to high CEO pay. Harvard Business Review. Retrieved March 19, 2023, from https://hbr.org/2015/05/the-factors-that-lead-to-high-ceo-pay

There was someone I once knew, lets call him Jake. He had been working at a location for about 6 months, and was running his division. Mind you this was an easy position for a high school student, but that didn’t change that he did his best work.

Jake worked hard to the point where he was the go to person to train new employees. He was also often scheduled to work alone on nights when he should have had at least one other coworker. After these months, he had his scheduled performance review and raise. There was a tiny increase of 3 cents, despite putting forth his best effort. Another coworker got a raise after 3 months for 25 cents. This coworker, lets call her Jane, was trained by Jake and didn’t do much when she was actually on shift.

After this situation occurred, Jake realized that it didn’t matter how much effort he put in to the job. He could do the bare minimum instead of always going above and beyond, and still get paid the same. His work wouldn’t be valued anyways so why bother right?

The result was exactly as you would expect. Jake enjoyed work a lot more, slacked off and still got paid the same. There was no need to put forth his best efforts anymore, and the company saw the areas it struggled because of this. There was no real ending to it, it just changed his work behavior towards that company forever until he left.

Compensation received from the job greatly impacted his work behavior. Seeing his coworker receive more when he believed that he should be at least be getting the same compensation completely changed the way he worked. In speaking with him, I came to learn that it changed his mindset for the worse.