Executive Compensation

The compensation executives make is way too high. This is especially true when you compare their compensation with that of the average employee in their company. Making several hundred times what your average worker makes is beyond excessive. These high-level executives make so much money that they have no idea how the average worker lives. This means they also have no idea what the average worker needs. If your average worker is living paycheck to paycheck or in poverty it doesn’t matter how well your company is performing, you are failing as an executive. Something needs to be done to make a limit on how much executives can be paid based on how much the average worker makes in the same company. Limit it to 100 times or something similar. This means that if the executives want to make more, they have to improve the lives of all the workers below them in order to have a higher compensation.

In today’s competitive business environment executives compensation just keeps rising because they are in high demand. It is hard to replace someone in such a high-level position and this gives them the power to ask for more money or stock options or whatever other perk they want. But all these things should be based on if the executive is able to create meaningful value for the company to justify being compensated so highly. If the company is doing poorly for any reason (and especially if it’s because of poor executive leadership) then the executives need to be compensated less. The leaders of companies need to be held responsible if the company is doing badly and not just blame external factors. I am not saying they won’t have an impact, but good leadership should be able to find a way to make value in difficult times.

If executives want to continue being compensated in excessive amounts, then they should have to earn it just like every other worker. Some of the pay they receive should be tied to performance that way if they fail to prove themselves then they will be compensated less. It makes no sense for a company who is struggling or firing workers to be paying executives bonuses and as a society we need to change things for the better.

Sources:

Week nine class lectures

Strategic Compensation chapters 11 &12

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