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Why the Large Discrepancy Between Executive Pay and that of the Average Worker is Unjustified

Updated on May 29, 2015

A report by DiPrete states that that an average CEO in major U.S companies was paid unbelievable 531 times when compared to their average workers. Furthered, most of those who are paid huge amount of money are paid on the basis of pay per performance, where the compensation are tied to the financial success of their entities (p.55). From this assumption, CEO believes that much of their appreciations in value are derived from their own talent, an assumption that is very wrong. We can agree that the financial performance of an entity is tied to the collective efforts of all the people involved and not the CEO alone. Therefore, it is ethically unfair to pay CEO’s exorbitant amount of money while ignoring the average worker who is a critical factor in the day-to-day operations and the performance of an organization.

I think it is very unfair to increase a CEO when the company’s workforce is downsized. This owes to the fact that upon the departure of some employees, those who are remaining will now be accorded added responsibilities, and increased workload. Therefore, it would be fair if the pay for CEO could be reduced, considering that his responsibilities are reduced. On the other hand, pay for existing employees should be increased to motivate them and make them feel appreciated.

Nonetheless, a CEO in a large entity should be paid in relation to the ratio of their input. This implies that should be related to the performance of their entities. While it may be the input of workers that triggers positive performance, it is the CEO who influences the performance of individual worker. He or she has to deploy strategies of ensuring that these workers are always motivated and performing. One form of such motivation is of course better pay and incentives. Other factors to consider are the credentials of the person, and the level of experience (DeGeorge 433). Nonetheless, the management should consider that the pay ratio between the CEO and the average workers is not too exorbitant to the sense that they discourage other workers.

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