Executive Pay Case Study
1) Why has there been widespread criticism of executive pay in recent years?
Average pay for top American CEOs and board chairmen has soared from $479,000 to $8.1 million in the last quarter century, as measured in annual surveys by Business Week magazine, the only source that goes back that far. The pay of average (non-management) workers over that time, as measured by the U.S. Bureau of Labor Statistics, hasn't even kept up with inflation. If average worker pay, which is now $26,899, had risen like CEO pay, it would exceed $184,000. If the minimum wage had risen at the same rate, it would now be almost $45 an hour. In just one generation, the United States has gone through a virtual revolution in what is considered fair pay for top executives …show more content…
But many executives and those who work with them say CEOs deserve this pay. The climb in compensation has begun to affect the pay of executives at hospitals, universities and foundations, as salaries there rise much faster than inflation. That's attracted the attention of the U.S. Senate's Finance Committee, which has discussed legislation to crack down on excessive compensation for non-profit leaders. All this comes at a time when average Americans are seeing their raises chewed up by rising health care costs, their retirement plans diminished or dropped, and their jobs moving to low-wage countries such as Mexico and China. A 2002 Harris Poll found that 87% of respondents felt that executives "had gotten rich at the expense of ordinary workers." A wide range of business and political leaders have also expressed concern. "We've had exorbitant compensation of CEOs which is not related to performance or the value of companies," said Roger Raber, CEO and president of the National Association of Corporate Directors. "There's such a gap between what the CEO makes and the top five people under him. And what about the other employees who are far under that? It demoralizes them." From the standpoint of some business executives, the challenge of competing in a global market place, and the constant pressure on
Average pay for top American CEOs and board chairmen has soared from $479,000 to $8.1 million in the last quarter century, as measured in annual surveys by Business Week magazine, the only source that goes back that far. The pay of average (non-management) workers over that time, as measured by the U.S. Bureau of Labor Statistics, hasn't even kept up with inflation. If average worker pay, which is now $26,899, had risen like CEO pay, it would exceed $184,000. If the minimum wage had risen at the same rate, it would now be almost $45 an hour. In just one generation, the United States has gone through a virtual revolution in what is considered fair pay for top executives …show more content…
But many executives and those who work with them say CEOs deserve this pay. The climb in compensation has begun to affect the pay of executives at hospitals, universities and foundations, as salaries there rise much faster than inflation. That's attracted the attention of the U.S. Senate's Finance Committee, which has discussed legislation to crack down on excessive compensation for non-profit leaders. All this comes at a time when average Americans are seeing their raises chewed up by rising health care costs, their retirement plans diminished or dropped, and their jobs moving to low-wage countries such as Mexico and China. A 2002 Harris Poll found that 87% of respondents felt that executives "had gotten rich at the expense of ordinary workers." A wide range of business and political leaders have also expressed concern. "We've had exorbitant compensation of CEOs which is not related to performance or the value of companies," said Roger Raber, CEO and president of the National Association of Corporate Directors. "There's such a gap between what the CEO makes and the top five people under him. And what about the other employees who are far under that? It demoralizes them." From the standpoint of some business executives, the challenge of competing in a global market place, and the constant pressure on