Essay Sample: Chief Executive Officers in US

In executive compensation, it is a widely known fact that Chief Executive Officers (CEOs) are paid significantly higher than employees. In America, CEOs are paid up to 361 times more than an average worker. Even though everyone knows that CEOs make a lot of money, the pay gap between them and their workers is shocking. The issue has sparked debate as more people are starting to believe that CEOS are paid more than they deserve. The CEO job has a huge impact on the economy and company workers. Due to that, businesses attempt to find the best candidate for the job and they do that by using attractive salaries. However, the exorbitant salaries raise the question of whether they deserve their pay. The paper discusses the notion that U.S CEOs are paid more than they deserve.

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Statistics from the Economic Policy Institute about CEO pay is astonishing. When looking at CEO compensation using the measure of stock operations realized, Mishel and Schieder (2017) find that by 2016, America's largest firms made an average of $15.6 million in compensation or 271 times more than the annual pay of an average worker. The authors mention that in 2015, CEO to worker-compensation ratio was 286:1 and in 2014 it was 299:1. According to the authors, CEO compensation has grown more than corporate profits. Donnelly (2017) indicates that CEO pay has grown faster than the stock market and the wages of the top 0.1%. The author adds that CEO pay is astonishing considering the fact that in 2016, the top 1% of CEOs earned 87 times more than the bottom 50% of workers.

CEO pay has been rising over the years. Rushe (2018) articulates that since 2009, their pay has been rising rapidly after their pay sunk in the early 2000s and the last recession. According to the author, bosses of large firms now earn 5.5 times as much as the average earner in the 0.1%. Furthermore, the author adds that the gap between worker and CEO remuneration has forced companies to publish their CEO to worker ratio. For instance in McDonald, the CEO earned $21.7 million while the worker earned just $7,017, which is a pay ratio of 3,101:1 (Rushe, 2018). In Wal-Mart, the ratio was 1,188:1, which means the CEO earned $22.8 million while the worker earned $19, 177. Also, Amazon boss earned $82,000 in 2017 and close to $1.7 million in securities while the worker earned $28, 446, a ratio of 59:1.

Overall, even though CEOs are paid more than they deserve, it does not mean that people have to accept it. In any organization, there has to be a collaborative effort. CEO pay does not reflect higher output. In fact, paying CEOs up to 361 times more than the average employee would only result in resentment in the organization. CEOs get paid more because of their power to set pay and not because of their talent in the organization. Truth be told, workers are more productive and talented compared to CEOs. Seemingly, CEO pay has outstripped stock prices and corporate profits. That said, CEOs have to prove to their employees that they actually deserve that pay. That can be done through maximizing collaborative efforts, which would make employees notice their relevance within the company. Most importantly, changes in policies would help in promoting economic stability by reducing or limiting incentives.

References

Donnelly, G. (2017). Top CEOs Make More in Two Days Than An Average Employee Does in One Year. Fortune. Retrieved from http://fortune.com/2017/07/20/ceo-pay-ratio-2016/

Mishel, L., and Schieder, J. (2017). CEO pay remains high relative to the pay of typical workers and high-wage earners. Economic Policy Institute. Retrieved from https://www.epi.org/files/pdf/130354.pdf

Rushe, D. (2018). US bosses now earn 312 times the average worker's wage, figures show. The Guardian. Retrieved from https://www.theguardian.com/business/2018/aug/16/ceo-versus-worker-wage-american-companies-pay-gap-study-2018