Executive Compensation Is Out Of Control. What Now? - Article Analysis Essay

Introduction

Below, is a critical thinking case analysis of the article, Executive Compensation Is Out Of Control. What Now? The analysis will be based on some WH questions namely who, what, where, when, why and how respectively.

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The people who benefit from the unbalanced executive compensation are the CEOs who are paid high salaries where they can improve their lives on the other hand, this is very harmful to the low-level workers who are poorly paid and cannot live their lives as per their wish and will despite the fact that they work for the same firm as the CEO. The decision on payment is made by the shareholders who decide how much to pay the CEO and the worker. This has been discussed by many people including Peter Drucker who said that CEO: workers pay ratio should be a maximum of 20:1 and Manfred Kets de Vries who said that many individuals see the CEO compensation game as an important bulwark of capitalism.

In many places, the CEO to worker pay ratio is more than 120:1 but there are other options for reducing the ratio to the one recommended of 20:1. To change this, people should advocate and advice the shareholders to reduce this ratio or the policy makers come up with policies-such as increased taxation to those firms with high CEO: worker pay ratio- thus forcing the shareholders to reduce the ratio in order to evade the high taxes.

The unbalanced pay is seen in big firms located in many countries such as US and India where on average; CEOs of the biggest publicly traded companies in the U.S. receive $14.3 million as annual pay. To get more information on this, one may have to visit the income tax collection agencies and compare the tax given by workers and CEO of some companies. It will be noted that there is a big difference between what CEOs and those who work under them pay as income tax . The people who can help are the shareholders who have the capability of reducing the pay ratio by reducing the CEO salary or increasing workers' salary. Policymakers can impose policies that advocate or force firms to reduce the CEO: worker' salary ratio.

The unbalance is acceptable if the ratio is relatively small where gap difference is small but becomes unacceptable when it becomes very big and CEOs in one day make more than what other employees make in a month. After people giving out their cry to the relevant bodies, they would know that they succeeded in their recommendations when the ratio goes down and the CEOs are paid a lesser amount or employees get a pay rise.This is only expected to change if people raise their concerns to the relevant bodies and persist to call for a change.

The imbalance is a problem for it seems to undermine some individuals and demoralizing some as people working for the same firm where workers even do more work than the CEO then the workers in a month, they get what the CEO gets in a day . The reason for the unbalanced pay is that there is a need for firms to grow and for this to happen, the CEO must have some leadership qualities that are possessed by few people thus making their demand and pay to go high

Conclusion

To know the truth about this, one has to check the CEO and workers' pay slips and compare the two and it will be evident that there is a big gap between the two . In order to change this for good, policymakers have to impose policies-such as increase the tax rates for those firms that have a big CEO: worker pay ratio- that will force firms to reduce the ratio and teach more people to have good leadership skills to maximize the supply of viable CEOs which will reduce their pay (price).