Excessive executive remunerations packages have been the bulk of splashy headlines, workplace concern, community and political debate about ethical justifications of the huge disparity between compensations of the company’s CEO and a factory worker. Abstract This research paper aims to explore the issue of the existing extra ordinary huge difference between compensations that exists between the chief executive officers (CEOs) and factory workers of most companies. Much information has been collected from various sites as indicated in the reference page.
This is a real situation in many companies of extremely large sizes and reputable global positions. The paper explores the significant gap between CEOs packages and factory workers. The qualities of the CEOs have been analyzed and the reasons that justify their huge payments. The opinions of the shareholders on CEOs compensation have been explored. The writer has suggested some recommendations towards addressing the issue. Hypothesis Any company requires a competent CEO to move through the hard challenges of global technology and acquire competitive advantage in the global market.
Visions into the future threats and opportunities facing the company are a prerequisite to strategic management. Performance of a worker is based on compensation from the company. Compensation should be equitable to the level of expertise of a talent and the possible challenges faced by the responsibility required by the particular talent. In any business organization, hierarchy is indispensable.
Senior and subordinate positions are therefore necessary in any business enterprise. However the disparity between remuneration of the most senior and the least position in the same company should be meaningful as a matter of ethic concern.Discussions Functional Role The CEO of any company holds the highest rank of the particular company, organization or business enterprise, especially the one oriented towards profit making. Big companies make use of board members to come up with policies that the company acts upon. The implementation of these policies is the sole responsibilities of the CEO of the company.
It therefore implies the success or failure of the company to meet the goals and objectives as laid down by the policies is the responsibilities of the CEO of the company.To achieve success therefore, the CEO must be widely informed and visionary towards the business environment. The CEO must translate the anticipated future changes and lay appropriate measures, to cope up with any negative changes, which may affect the business (Garten, 2002). The changes expected and their theorized solutions should be precisely communicated to the entire task force of the company so that, every participating worker is adequately ready to face challenges posed by these changes. The CEO has a responsibility of setting a good example to the rest of the workers.Leadership competency inherent in the CEO should be used as a role model for the others to copy and utilize for the sake of the company’s progress.
Role modeling should extend to formulating desired standards of the company as a significant component to achieve a competitive position required by globalization. All employees should receive support and motivation as a result of the efforts of the CEO (Kim & Mauborgne2005). In the business environment, there usually exist threats facing productivity. There also exists some favorable opportunities.The two are hidden to a layman, but to the CEO, the ability to foresee these issues should be automatic.
This is the visionary quality of the CEO. The global market is fast expanding at a pace requiring very competitive CEOs. The labor market is accompanied by rapid technology changes and advancements, which need to be incorporated into the company’s labor framework. The knowledge required in this field is essentially vested on the company’s CEO whose performance is very critical to the competitive advantage of the company (Charan, Drotter, & Noel, 2006). CEOs remuneration packagesThe compensation given to the CEOs of most companies have been a centre of interest by media, the community and the politicians. Why should they enjoy hefty packages in the tune of hundreds of times as compared to other workers of the same company? This has been a controversial issue requiring address.
The lavish payments are sufficient to afford CEOs luxurious lives and make them millionaires. The projections currently reached at using the current trend hold that by the year 2050, some companies CEOs will earn 150,000 times the average wage of a factory worker in the same company.This disparity is so huge that the issue has raised concern. Some individual feels that whatever the position of the CEO and whatever the contribution to the company the CEO makes, such a disparity is unwarranted and to the true sense, unethical. Furthermore, some companies paying such huge packages to the CEO end up realizing some loss in their production, but their existence is justified with reasons in the company.
But irrespective as to whether a company makes a profit or a loss, the question remains whether the great disparity in payment between the CEO and the majority of the workers is justified.Many sectors have expressed anger towards those payments which are enormous. The compensation of the CEO is likely to scare away investors in potential fields due to the threat posed to the companies to pay CEO such high payments (Korten, 2001). The shareholders also approve the awarding of the company’s stocks to the CEO as part of bonus packages. These awards empower the CEO to become owners of their employer company.
This is a great incentive to the CEO and a motivation to improve on the performance of the company. Justification for hefty CEOs Packages.The CEOs are subjected to evaluation, judgment and scrutiny by the company’s shareholders, the general public, the media and the politicians. They must overcome the challenges brought about by their performance. The companies they ran have some potential opportunities to become extremely rich through their efforts. Therefore they are usually on a daily scrutiny from various spheres (Bakan, 2005).
The CEO is the highest ranking talent in any company. Thus, correct choice and hiring of the CEO is very crucial towards the performance of the company.In the daily schedules of the CEO there exist no weekends or vacation, meaning that the CEO’s intellectual capability is a resource to be tapped by the company all the time, round the clock. The profits and profit margins realized by the company depend entirely on the CEO. The company’s responsibility in the manipulation of existing resources lies squarely on the CEO of the particular company.
The companies paying these hefty packages attribute the packages to the degree of performance of the CEO. However, the level of wisdom the boards of directors use to come up with the seemingly illogical figures of the CEO’s packages is questionable.The other issue of concern is the opinion of the shareholders as regards the huge CEO’s compensation (Belasco & James, 1992). What are the opinions of the shareholders with respect to excessive payment of CEOs? Based on confidence the company is able to impart to its shareholders, the question of the huge pays may not arise. The shareholders approve the packages without arguments on condition that the benefits they derive from the company are handsome as compared to other companies.
The packages are seen as a shield to counter any possible mishandling of the companies assets and options.Any workplace thefts are believed to be protected by the company’s CEO. They are believed to posses a talent and high skills of management necessary to move the company through a competitive global business environment. This managerial talent is taken as an asset of the company just like other existing assets (Clegg, Kornberger, & Pitsics, 2005).
The CEO compensation is correlated with the size of the company. The assignments of the CEO are believed to be competitive due to the competitiveness required in the global market.The shareholders approval is also based upon the ability of the CEOs to capitalize the market and positioning their company at a global focal point. The fortunes of multinational business enterprises entirely lie on their CEOs. The package therefore is treated as an economic rent by the company (Clegg, Kornberger, & Pitsics, 2005).
Is performance of the company related to profit generation? Ironically a company with a highly paid CEO can operate at a loss. This has happened on many occasions whereby the financial statements of the company once analyzed, result to negative net income.In such a scenario, the CEO is not blamed for the losses incurred by the company. On the contrary the company argues there had been strategic plans to reorganize the company’s production processes, to improve on the performance of the company in the future. This is argued from the visionary quality associated with the CEO.
The logic advocated for is that, the strategic reorganizations will have far reaching economic benefits in the future of the company. The competitiveness of the company should not be perceived from the short- term perspective but rather, a long- term projection is a requirement.The company should be rooted on a stable foundation and this calls for utilization of the company resources for the long- term investment. The managerial skills necessary to achieve the long- term company’s goals are possessed by the company’s CEO. This is enough justification to accommodate for losses realized sometimes, within the company while continuing to offer hefty packages to the company’s CEO (Bashein, Barbara, Markus & Riley, 1994). The company’s stock also determines to a great magnitude the justification of excessive payments to the CEO.
The compensations in the market place of the company’s stock may be so favorable at the time when the company is suffering losses in income in tunes of millions of dollars. This is considered insignificant given the scenario of the appreciable market prize of the company’s stock (Bashein, Barbara, Markus & Riley, 1994). The company’s views on CEO Packages Most companies’ views on hefty packages of their CEOs are positive. Their talents are believed to be the cause of the company’s success.
Companies also believe that any improvements achieved internally are the result of the CEO contributions.The added value of the company is the principle attraction of shareholders to the company. CEOs are therefore seen to be vital figures towards attracting investments into the company through attracting enormously high numbers of shareholders. For shareholders to express interest in any company there should be an aspect of transparency shown by the company through the CEO. This important component is believed to be inherent in the company’s CEO as the model of the company.
The company also demonstrates its corporate governance through the CEO.The CEO is taken as the company’s think tank. The CEO’s intellectual capabilities are cherished as company’s property available for taping. Qualities associated with a competent CEO are brilliance, information update on the company’s productive environment, awareness of technology advancements and timely positive response to the changes in technology, curious on technical issues facing the company, awareness of current developments surrounding the company and increasing the speed of policy issues execution and implementation (Bashein, Barbara, Markus & Riley, 1994).
These qualifications have earned up to forty- fold benefits of the CEO as compared to a factory worker in the 1980’s, up to eighty- fold in the 1990’s and up to four hundred- fold in the late 1990’s. With these progressive projections, it shows that the packages of the CEO in the year 2050 would undergo an elasticity of up to 150,000 times that of a factory worker (Sims & Manz, 1995). Is the disparity okay? The idea of compensation is a theme in the clamour of group politics.The entire workforce of the company as well, requires social betterment in terms of civil rights, income, and housing environment among other welfare issues. The company should strive to put things right, to properly fit the groups that are disadvantaged and truly, special treatment is required to prevail and especially for those representing the disadvantaged.
Action is required to address the impact of the selfish private interests enjoyed by the privileged CEOs at the expense of the majority oppressed workforce. Their talents require recognition as significant contributors to the success achieved by the company.Majority of the tasks necessary for the implementation of the company’s policies lies on the subordinates as the contributing factors towards the success of the policies formulated through the visionary strategic management of the CEOs (Clegg, Kornberger, & Pitsics, 2005). Although the skills, experiences and the level of expertise are never equal, the huge disparity existing is all the same, unimaginable to warrant complains.
The key players in the company are very significant to the level calling for their bonuses and motivation benefits revision. RecommendationsThe compensation committees of the company’s Board of Directors are responsible for formulating the compensation packages of every worker in the company. To have a clear understanding of the existing huge disparity between wages of the CEOs and the lowest factory worker, their sessions of meetings needs to be accessed. Participation in these meetings is a healthy tool to use in a bid to challenge the existing disparity.
The arguments they raise to come up with the huge CEOs compensation packages can be well understood through attendance of their meeting sessions.Any entitled shareholder should be permitted to entry for democratic opinion to be shared among key players in the company (Schermerhorn, Hunt & Osborn, 2005). The shareholders are also empowered by the potential clout inherent in their position as shareholders to analyze the CEOs packages and expose them for criticism. The best solution to any inherent problem is to collect all the relevant facts concerning the issue at hand, analyze all the facts and let the truth be known to all affected individuals.The direction of the problem solution will, from that point of view be adequately addressed.
Most of the company’s workers are not exposed to the true scenario involving the huge disparity between the pay packages they receive and the ones received by their CEOs (Schermerhorn, Hunt & Osborn, 2005). The last resort to addressing the problem is to organize peer workers, the media and the community in rallies aimed to face the company’s Boards of Directors to demand the address of the disparity issue.The welfare of the workers should be addressed and especially when the company has had positive progress. It is quite unfair that one CEO takes home an appreciable percentage of the profit of the company while the remuneration package of all the other workers combined has an insignificant share of the company’s profit. Worse still the bonuses and the benefits of the employees are greatly ignored. Considering that the workers gloss efforts sum up to the success of the company, their welfare requires equitable compensation.
It does not imply that their pays should equal those of their CEO, but at least the huge disparity in the packages with their CEOs is demoralizing by itself. They are bound to feel neglected and underrated if a CEO’s monthly pay is equivalent to a lifespan salary of a co-worker in the same company. On sincere moral grounds there has to be fairly equitable distribution of the benefits of production (Schermerhorn, Hunt & Osborn, 2005). Conclusion The huge disparity in existent between the CEOs of the best performing companies places the CEOs in extremely prestigious position with respect to their subordinates.
The benefits enjoyed put them in position seen by the workers and the community at large as the owners of the companies. At the end of the day the CEO take home quite handsome packages that warrant them to become millionaires while the factory workers struggle in their lifetimes to offset minor bills needed for their basic life. It is an appreciable fact that through their contributions, the companies attract shareholders who in return earn benefits out of their investments in the company.However the trend in the progress of the increasing disparity is a clear cause to scare investors and demoralize the workers of the company alike.
The success of CEOs depends on their credibility, transparent and represents the highest degree of integrity. This requirement is also taken as a justification for their hefty remuneration packages. The shareholders of the respective company are the most appropriate individuals suited to address the disparity issues. The shareholders are the rightful owners of the company and therefore the board of directors should act as per their guidelines.Much attention should be diverted from whatever the gains they reap from the company in form of dividends but rather concentrate on the significant percentage of the company’s profit pocked by a single CEO.
The welfare of the factory workers needs to be given an appropriate attention. Most of the workers perform their duties in extremely difficult and risky situation. The risks are mostly ignored as they are not given the relevant rewards and financial coverage. This also contributes to the widening gap between their payments and those of the CEO.
