Question

CEO pay is a 'hot button' issue in many countries today. The average CEO's pay is 183 times that of the average employee. In 1965 this average was 20 times. Your book indicates this ratio is 135 in Australia and 73 for the Netherlands. Some companies have frozen executive pay and are migrating to tying pay to performance and awarding performance stock awards and bonuses.   Based on the presumption that there is a pay imbalance between CEO's and workers, how might this imbalance be addressed (made more reasonable)?

Answer 1

It is not a good thing to do to increase the salary difference between the staff and C-Suite executives. That is mainly because the company's net productivity and revenue is spent on paying the managers 'wages and so the workers are stuck with the salary given. This impacts the workers 'overall productivity and discourages them from doing their best for the organization because they believe they are not working for their own benefit but for the betterment of the managers of the organization. Several of the forms in which this wage gap should be managed are: Organizations must create an employee salary cap and it must be within the 1:200 pay ratio category, ensuring consistency in the total salaries and benefits process. Such accountability would help the company retain reasonable executive pay and keep the workers 'overall morale relatively good, the executive compensation will be related to the company's results. If the organization runs in deficits, so the managers are not eligible to receive lavish bonuses. This will boost the executives 'sense of responsibility and transparency and they work hard to make their living. It will increase the sense of control and responsibility among managers who will work hard to gain their variable output portion, thereby improving the company's overall profit.

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