According to a recent Wall Street Journal article entitled “Pay gap fuels worker

Question

According to a recent Wall Street Journal article entitled “Pay gap fuels worker woes,” . . . the gap between top executive and employee compensation has never been greater. That’s triggering lower morale and productivity on some corporate staffs, and making it more difficult to attract and keep talent, even in a slowing economy. . . [on the other hand] hard-charging CEOs, who have spent decades climbing the ladder by putting in 80-hour workweeks, say they deserve to hit the jackpot when they gain the corner office. What is your view on these conflicting perspectives? Would you be willing to make the necessary sacrifice to become a CEO and “hit the jackpot”? According to management guru Peter Drucker, a CEO’s pay should never exceed 20 times that of the average employee. Do you agree? Explain why or why not.

Explanation / Answer

The gap between top executive and employee compensation has never been greater. That's triggering lower morale and productivity on some corporate staffs, and making it more difficult to attract and keep talent, even in a slowing economy.

Last year, payouts hit record highs despite efforts by corporate directors to put the brakes on perks such as overly generous signing bonuses and exit packages. According to the Congressional Research Service, the average pay for CEOs was more than 180 times average worker pay, up from a multiple of 90 in 1994. Total direct compensation for CEOs was a median $8.8 million, counting salaries, bonuses and other incentives, as well as the value of restricted stock, stock options and other long-term incentive awards at the time they were granted, according to a survey by the Hay Group of 200 major U.S. companies.

For many employees, the higher cost of gasoline, health care, education, food and other daily expenses has left them with the feeling that they are treading water. Hard-charging CEOs, who have spent decades climbing the ladder by putting in 80-hour workweeks, say they deserve to hit the jackpot when they gain the corner office. But ambitious employees have similar feelings, and figure their best chance to close the earning gap is to keep zigzagging among companies and industries. "When executives talk about a talent shortage in their ranks, they're really talking about a commitment shortage," which steams partly from pay inequality, says Rakesh Khurana, an associate professor at Harvard Business School. "The greater the inequality, the less willing employees are to learn specific company ways of doing things that aren't going to be useful to their next employer."

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