One of the most serious issues we face in America today is the growing gap in income levels. Executive compensation has soared while the working wage remains pretty much stagnant. According to the Economic Policy Institute, since 1978, the average worker’s compensation has increased 12% whereas the average CEO’s compensation has increased 1000%. The disparity seems to boil down to one thing – – – Greed. The ludicrous salaries we see today are not because they are justified but because they are possible. It hasn’t always been that way.
I worked 30 years for one of the largest and most profitable companies in the world. No executive of the company ever appeared on a list of the highest compensated executives. It was drilled into us that we had four stakeholders to take care of; the shareholder, the customer, the employee and the community. Not sure that would be true today. The year I retired, 24 years ago, I, and many others, got a curious letter from the chairman in essence saying that our bonuses would be much higher than usual (not because of outstanding performance!) because a study determined that our compensation policies were uncompetitive with our peers. It was now possible, we had been left behind and risked losing our best talent to other, more generous, companies.
Some see capitalism as the culprit. That would be simplistic and unfair. A system that rewards hard work, innovation and risk-taking is to be encouraged and applauded. There must be personal incentives that spur people to work their hardest and be their best. It has worked well in American for many, many years. The problem is not the system, it’s the abuse of the system. It’s greed that places personal interest above that of the primary stakeholders. It’s the elite old-boys club where the best interest of the select group is supported, maintained and shared.
So what is the solution? I’m not an HR guru but it seems to me that compensation must be tied to long term performance, not short term, and often shortsighted, goals. While I would not support rigid regulation on compensation, there must be accountability and there must be better recognition and ample rewards for the full spectrum of company staff. But there should also be some metrics that guide employee compensation. In the final analysis, shareholders must be the final arbiter on whether company management and its board are caring for all its stakeholders and reflecting the best practices in the industry.
—- just the view of a common man
Views of a Common Man 