Gap between CEO salaries and average employee pay

 

 

Abstract

A chief executive officer is the highest ranking officer in a company. As part of his responsibilities he makes final corporate decisions, manages overall business operation that include company finance, resources and communication between board of directors, shareholders and employees. The high pay might seem very much justified with the role and responsibilities a CEO might have. A CEO plays a role of a team leader, and having a leader who is great at team building is essential. CEO is a strategic planner, in any sector businesses are competing against each other, and a CEO makes sure his company comes out at top. Moreover a CEO interacts with board of directors and looks after interest of company stakeholders. So with so many critical responsibilities it is perfectly understandable why CEO’s pay is sky high. But given the fact that CEO pay and average company pay currently stands at 300 to 1 currently is not really motivating fact for employees

Keywords: ceo pay, income inequality

 

 

 

Gap between CEO salaries and average employee pay

Is it ethical for CEOs to be paid so much more than other employees?

It might not be ethical for CEOs to take a huge pay check, as one of the responsibility CEO has to motivate and inspire each and every employee. And an average employee with average pay check might not feel that CEO getting a huge pay check is fair since all the execution is done at ground level. Higher CEO pay demotivates average employee (Seymour, 2016) and CEOs action that demotivates employees is unethical.

Does this practice use a valid reward distribution system?

Given the scenario a company doing extremely well sales and profit wise, a CEO gets a fat pay check, and it is true that CEO motivates and drives the team or the employees to get the success, so she / he deserves recognition. But it is also true that if CEO pay is 300 times of average employee pay (Mackey, 2009) then one average employee might think that his / her work is insignificant and she / he might lose motivation. A CEOs success is very much dependent on each and every employee’s success. And it is crucial that each employees gives 100% to attain success in competitive market. So this reward distribution system is flawed.

Should companies be considering ways to reduce the gap to improve the overall moral of their employees?

The companies should look for a way to reduce the pay gap, and that might mean reducing the CEOs salary, because it might not be possible to increase the pay for each employee. We know that a CEO runs the company and motivates employees. And each productive and successful employee makes CEOs / company’s success a reality. And one of the responsibility CEO has is to motivate each employee and help the company succeed, if that means reducing own pay check, so that is only way to go. The employees might not feel insignificant and if they see CEO taking a pay cut, employees would realize how criticality of being a team player, that might act as a motivator.  Now the question is what a company can do to reduce the pay gap? Reducing the pay of CEO is a simple solution but that might not be considered as win – win solution, as a CEO might walk away with a bigger pay check. A company can consider stock or equity options for all employees including CEO as variable pay. In that was a higher stock price would benefit each employee. But this option might not work out that well in a huge organization. In those organizations CEO’s salary can be capped like it was in Whole Foods (Mackey, 2009). So, CEO’s salary can up as long as employee average salary goes up, that way employees will work for their own pay check and CEO can benefit from the success of the team too.

Do you think CEO and upper management salaries are subject to ethical consideration?

One cannot deny that a paycheck is a huge motivator. And CEO as an individual might follow the money, join a company that offers a bigger pay. But there is another fact that demotivated employees are bound to leave eventually or they would be less productive. And if employees keep on leaving that will increase the cost of hiring, training and company will lose productive days resulting company lose more money. A less productive employee is no better, company loses money there too. So it is always wise to keep you team and keep them motivated to be successful. Above all the responsibilities one CEO has, the most critical is to maximize sales and profit for shareholders. And a company that offers low job satisfaction is not very popular among employees. So if employees do not want to stay or come to the company that means the COE would fail miserably eventually. As John Mackey pointed out employees really do care about the income inequality and pay gap between average employee and CEO (Mackey, 2009), it should be management’s responsibility address the issue that has any negative impact on workforce, so that company can retain better performing resources and build a loyalty. If after being aware of this issue the management decides to leave it on the external equity market and do nothing, then that would be unfair to the employees and unethical.

 

 

 

 

 

 

 

 

References

Mackey, J. (2009, April). Why Sky-High CEO Pay Is Bad Business. Retrieved from https://hbr.org/2009/06/why-high-ceo-pay-is-bad-business

Seymour, K B. (2016, January). High CEO pay demotivates employees. Retrieved from https://www.professionalpensions.com/professional-pensions/news/2443461/high-ceo-pay-demotivates-employees

 

 

 

Give an example of someone you’ve tried to influence lately

Give an example of someone you’ve tried to influence lately.

In my last project I had to influence a team member who was reporting to me. We had a tight delivery situation where every 2 weeks we (as an application implementation team) had to deliver working functionalities. The team member had a module assigned to him and was taking more time to finish than what was allotted to him.

 

Was it an upward, downward, or lateral influence attempt?

               Since I was his lead and he was reporting to me, it was a downward influence attempt

 

Were you successful? Why or why not?

After providing with an approach that would save him time, he was able to deliver in short period of time. So I was successful to influence him to change his approach to save time.

What could you have done to change the outcome? Explain?

               Let me try to provide small description of the situation first. The team member was taking more than 3 days to complete a task, when only one day was allotted for that particular task he was assigned to. One might say, the estimation to complete the task was wrong. That was possible, but given the circumstances, going back to drawing board, re-estimating and changing the deadline was not the option. That would have caused us money and an unhappy customer. Now, our project manager was asking a very valid question “why is he taking so much time?”

I could have just told the team member that we had a deadline to meet and just hurry up. But, I decided to understand his method of executing the task. I found out he was trying to be really thorough, he was stressed too, since he had the deadline in mind, and he was trying to achieve a lot in very short time. And honestly, I did not see anything wrong with being thorough.  But given the situation, we could not have taken more time to finish one task. So, I explained him the situation, and tried to explain the gravity of the situation in hand. Missing deadline had financial and contractual impacts. He understood and agreed. Now that he was on-board, we had to come up with an approach that would not compromise the quality too much. We identified most critical areas or functionalities business would use most of the time and we decided to focus on those areas first to meet deadline. And less used parts, we decided to work on later.

On ideal scenario, we should have bring in another person who would have helped him share his work load and yet maintained quality of deliverable. But bringing in new resource would have costed money and time to train. But in this case, although I successfully influenced him to change the approach, but it was compromise with the quality. Just to mention, later in the project we took care of that part and client was happy with overall quality.

 

Next, give an example of a time when your behavior was influenced? What were your influencing factors?

In the same project I tried to help customer by taking in some requests those were not our deliverable, neither we were under any kind of obligation to deliver those. And I was influenced by my project manager not to bring in any request from customer.

Essentially 2 thongs influenced my decision, not to entertain additional customer requests – we were not getting paid for those extra requests and we still had to meet the initial deadline, our deadline wasn’t going to be extended because of those additional requests

At first I thought about customer and the relation we could have built, but then working for free and missing deadline would not have helped the team with reputation anyway.

The Stressor Factor and situation

The Stressor Factor and situation

I work in an IT consulting firm. As consultants we are often deployed to projects with tight deadline. The technology varies from project to project, each client has his own set of system and specific way of operating business. Due to tight schedules and deadlines resources do not get much time to learn the system or business process, so the learning curve has to be short and steep. Project managers have to maintain profitability so getting more resources or providing training is not possible. Learning new application / system, understanding the business process and understanding what we are required to deliver adds up along with the actual deliverable, resulting in increased workload and long working hours. I have very little to no control over, what I am supposed to deliver and when, as everything is pre-defined. As a team lead I find myself with a team of rookies. They require training, grooming and all extra attention one can imagine. So all these put me under lot of pressure and that often causes stress.

 

How it can be reduced

               The long hours and workload mainly caused due to tight deadlines, short time to learn and very little to no training. So, everything boils down to “lack of time” and less resources. I am aware that whatever solution I suggest might impact the margin or profitability of the project, but since we are focusing on ways to reduce stress I will not worry about profitability for now. First of all, when we form a team we need to consider and allot some time to train them in the technology and business process. Having the knowledge up front will reduce learning curve and boost productivity. And this is not something I alone can do. The management team would have to initiate this change in process. They need to be okay with the impact on timeline / deadline and cost / budget. And the team need to understand the criticality and benefit of upfront training. Along with that they need to understand there will be minimum room for error and on job they are supposed to know the technology and application, so they should not expect too much help.

The management and Organization would have critical roles. As managing timeline of projects, providing training up front would be a cultural change organization wide, that has to be approved by management.

 

Consider the larger picture of stress management in the workplace. How important is it that organizations help employees manage stress?

               In my point of view it is very critical. Stress often impacts health. I can speak from my experience, due to lack of sleep I used to be very irritable most of the time at work and at home. That impacted my relationship with my coworker. It definitely did not help with productivity or quality of my work. Neither did it help me be loyal to my employer, I wanted to get out of the situation as soon as possible. So the fact of the matter is, if organizations can help employees manage stress that will convert into better functioning team, higher productivity from employees and longer retention rate. One more benefit would be, less paid time offs, employees with good health and good mood might decide to show up at work more often that those who are not happy. It is always profitable to keep employees around, as hiring and training new employee is expensive and risky, because you never know the quality of the new hire while hiring. So, there might be some initial increase in expenses for organization to reduce employee stress but in long run the return on investment would be bigger.

 

Is it incumbent upon an employer to help its personnel to deal with stressors that may or may not be related to the workplace itself?

               Employer should be only worrying about stress related to workplace. Although if an employee is stressed some matter that is not linked with workplace, it might impact employer, as the productivity and quality of output from the employee might suffer, but it is hard to determine if employer can do anything about it. Say an employee is going through a divorce or suffered a loss of closed one, may be management can approve some paid time off, and encourage the employee to seek professional help. Employer should provide health insurance to help the employee cover the cost partially or fully. But like I said, it is hard to find out from employee unless we have an observant and compassionate management team. The manager should notice the grieving employee, offer him / her help, listen them out and then provide solution to show them that the employer cares. That is best possible situation for employee in my opinion.