Question

Based on your research, are executives overpaid? Why or why not?

What to you feel is the right differential between the lowest paid employees and the top executive pay? Should it be 5x, 10x or 1000x or more?

Tournament Theory of Motivation would say the bigger differentials will motivate employees to work hard for promotions. Equity Theory would suggest that people at the bottom will be demotivated when they think about their rewards/work ratio compared to executives. Expectancy Theory may suggest that unless the system is fair and people really have an equal shot at advancing the "valence" or the motivator would be low and people would not be motivated - this really impacts racial and gender fairness in compensation plan designs.

What do you think? Does any of this matter to compensation design?

How does this differ from compensation for movie stars, sports figures, etc?

As always, support your conclusion with external research from CREDIBLE sources.

Answer 1

Answer 1 – In my opinion, there is nothing wrong in paying high salaries to the top executives in comparison to the lower level of the employees as these executives are highly responsible for the strategic direction of the organization and play a significant role in making the winning strategy, undergoing a lot of pressure, using their intellect and decision making power to turn around the company’s performance. The job requires a lot of dedication and 24*7 involvement and dedication.

Answer 2= It totally depends on the resources of the organization and the level of the strategic importance of the position of the CEO or top executives. The MNCs such as Google and Apple has a lot to deal with when it comes to a strategic decision so these organizations might have an unbelievable difference in the compensation of the top executives in comparison to any mid-sized or small-sized organization.

Answer 3= In my opinion, it is the fairness of the compensation policy that motivates a lot to the common individual as if there is any discrimination among the same level of employees related to the compensation and rewards this will depolarize them more. Therefore the most suitable theory that can be best fitted in this case is the Expectancy theory

Answer 4= In my opinion, the same philosophy will not prevail in the case of celebrities. In that case, the Tournament Theory of Motivation will be a more practical approach as this will motivate fellow celebrities to sharpen their skills to perform better and get higher rewards and compensation

reference=

Mishel, L., & Wolfe, J. (n.d.). CEO compensation has grown 940% since 1978: Typical worker compensation has risen only 12% during that time. Retrieved from epi/publication/ceo-compensation-2018/