CEOs, Workers, and the Costs of Excess - 634 Words

CEOs, Workers, and the Costs of Excess Students Name Course Title May 3, 2013 CEOs, Workers, and the Costs of Excess The term executive pay has acquired bad connotations over the past decade or so and the recent Occupy Wall Street movement brought this issue back into public consciousness on a worldwide scale (Minder, 2013). In Switzerland, the parliament recently passed legislation that would limit executive compensation excesses under threat of fines and imprisonment and the European Parliament agreed to limit banker bonuses to twice their base salaries. Adding fuel to this fire was last months announcement that the golden parachute for departing Novartis Chairman Daniel Vasella would include a $78 million dollar severance payment. While these citizen protests and legislative actions could be an overreaction to a few isolated cases of executive compensation excess, the data suggests otherwise. According to the AFL-CIO (2013), executive pay has increased dramatically over the past several decades compared to worker compensation. In 1982, the pay ratio between executives and workers was 42:1, but by 2012 it had increased to 354:1. This 8.4-fold differential in compensation suggests that the productivity of executives has also increased 8.4-fold relative to productivity of workers. If executive pay is positively correlated with a firms bottom line, then higher pay should predict success. Unfortunately, researchers have found the opposite to be true. In the daysShow MoreRelatedEssay Human Resources Case Study 771015 Words   |  5 Pagesinsurance costs increased from $4,680 per year in 2000 to $9,869 in 2010. It becomes very alarming considering the companies profits have continued to shrink during the recent recession. This puts a huge burden on everyone in the company because drastic measures now have to be taken in order to keep Quality Auto Parts in business. 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