Criticism of Executive Pay free essay sample

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, hasnt 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 vs. workers. 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. We will write a custom essay sample on Criticism of Executive Pay or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Thats attracted the attention of the U. S. Senates 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. Weve 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. Theres 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 companies to show ever-higher profits has turned their jobs into pressure-cookers. The pressure comes from the technical competence required, said Joseph Baksha, the president and top executive of Outlook Group Corp. , a printing and packaging company in Neenah. You have to travel 80 percent of the time. You need to be a pretty good lawyer, and nowadays a good accountant. You can make one mistake at a cocktail party and end up in jail for five years. Baksha also said the average tenure for CEOs has been decreasing, which shortens the period to earn big pay. You go 10 years and youre burnt out, he said. Baksha and others compare these executives to sports stars and entertainers, whose unique talents gain them huge compensation. But Nell Minow, editor of The Corporate Library, questioned this comparison, noting that most CEOs have a great deal of power over the boards of directors that oversee the top executives pay. The Corporate Library is an independent investment research firm based in Maine. Theres a big difference between athletes, movie stars, rock stars and CEOs, Minow said. CEOs are the only ones who pick the people who set their pay. The other categories are the ultimate in pay for performance. Even the Business Roundtable, an organization of the countrys top 150 companies, said last year that it shares the public perception that some executives have reaped substantial financial rewards in the face of declining stock prices and staggering losses to employees and stockholders.