Executive Pay Essay

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Executive pay, particularly as it relates to the total compensation paid to Chief Executive Officers (CEOs), including salary, incentives, lump sum payments and retirement benefits has been subject to scrutiny for decades (Lorsch & Khurana 2010). This warranted attention intensified following the economic crisis of 2008, as many questioned to what extent CEO salaries and incentives may have contributed to excessive risk-taking

(Bebchuck 2012). Today, debate continues as more academics, politicians and economists have begun to express very significant concern about growing income inequality between rich and poor world-wide. The extreme concentration of wealth in the hands of very few – and the disappearing middle class – have been the

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It is easy to see why employees of a large corporation – many of whom might earn a modest salary – would be frustrated or even de-motivated by the excessively disproportionate compensation packages provided to the CEO and executive team managing their company. While certainly accountable as leaders, senior managers are not solely responsible for a corporation’s results and performance – but are paid enormous bonuses as though they were. This is especially relevant when the results achieved do not fall within the control of those CEOs, as is the case of share price which is determined by any number of factors. The optics of this suggest the oversight role provided my management somehow merits the full reward, despite the hard work of employees at all levels. While “money is a complicated motivator” (Laegaard & Bendslev 2006) and doesn’t always guarantee employee performance or satisfaction (Namin-Hedayati n.d.), it’s absence – or unfair distribution – for objectives met would undoubtedly lower morale.

Also, the marketplace argument – or the notion that massive CEO and executive compensation is a necessary component to attracting and retaining executive talent (Lorsch & Khurana 2010) – further

It doesn’t take much to see a significant income gap that serves neither the organization nor society.

Lastly, it is important to note the “dominant paradigm” or corporate culture that exists today (Lorsch &

Khurana 2010). In this paradigm, the corporation exists to maximize profit for its owners – or shareholders – with only limited regard for other critical stakeholders. By creating and leveraging massive compensation or incentive schemes predicated on an increase in shareholder value, the seeds of unethical behavior and organizational dysfunction are more likely to grow as leaders’ focus narrows towards quarterly results. The purpose of a business within in society and its role within the communities it operates diminishes in importance

- as does the health and well-being of employees – and profit becomes the only measure of value. In this paradigm, corporations are no longer accountable for the moral, political, social or environmental