The Pros And Cons Of Chief Executive Pay

Income inequality has emerged as a major political and policy issue, and chief executive pay has become a potent symbol of the growing divide between rich and poor. Many economists argue that the widening gap hurts the economy: When wealth is concentrated instead of broadly distributed, it curtails the spending of middle- and lower-income consumers who ultimately drive the US economy. In the United States, compensation for chief executives soared 937 percent between 1978 and 2013, while the average worker’s compensation climbed just 10 percent, according to the Economic Policy Institute (Johnston, 2014). Some, specifically those who benefit would argue for a large gap between CEO pay and the average employee pay. They may argue that the pay

Public corporations are complex entities that benefit society in their generation of wealth for shareholders, provision of employment, and production of goods and services for consumption. A sufficiently high compensation for CEOs and senior executives is therefore, justified (Balnaves-James, 2015). However, this is not justified nor does it support society. A particular fiduciary duty of CEOs is to accept no more than the minimum compensation necessary to ensure productive and effective performance in the best interests of shareholders. This is logically sound, for if a CEO or executive accepts more than the minimum, they are effectively detracting from the profitability of the business by increasing costs (Balnaves-James, 2015). ¬In July, interim Kentucky State University president Raymond Burse, a retired General Electric executive, took a voluntary $90,000 pay cut to boost wages of the school’s lowest-paid workers from $7.25 to $10.25 an hour (Johnston, 2014). So even if the business can afford to payout the money, it would benefit the business to pay its employees more, which in turn would make for a better working environment and could be shown to produce