Executive pay has become a controversial conversation in business over the years. The stand for executive pay is that it attracts and helps retain CEOs and other executives in the company. However, the stand against Executive pay is that is breeds inequity in the compensation systems.
In my opinion executive pay should not be as high as it is in the United States. Between 1978 and 2018 executive pay has increased by 940% and yet normal compensation has only increase 12% in this same time period (Lecture: Executive Pay). I understand that CEO positions are complex and unpredictable which is why placing them in a company’s standard pay ranges and pay grades don’t work. Along with this CEO’s and top core employees take on more responsibilities and risk in their positions which makes some level of executive pay necessary. Without this higher compensation it would be difficult to fill open positions, retain current CEOs and encourage lower level employees to work up to top management positions.
That being said the current difference in compensation between the majority of the work force and CEO’s seems highly excessive to me. While it may be seen that this difference is intended to motivate people to work up to high paying positions, it seems to rather just increase inequity and continue to grow the pay gap. One of the hardest parts of executive pay for me to rap my head around is that while many people are putting in their best work to barely earn a living wage, CEOs can perform their jobs poorly and be paid more money than the average person will see during their working years to step down from the position. Overall, it seems that executive pay feeds continues to feed the wealthy while much of the workforce is stuck in middle or low class.
In my opinion CEOs and top management should receive higher compensation than the positions that fall in below them in the hierarchy of the company. However, this difference should not be millions of dollars. In terms of benefits I feel that the most important ones are the services such as life insurance and retirement plans as these provide security for the CEO and their families. I also believe that using stock options for part of the CEO’s compensation is useful to both provide incentives to retain employment as well as align the goals of the CEO with investors and board members. These options are also appealing to CEOs as in some cases there are tax advantages and opportunities to earn gains on these investments.