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It seems like the salaries of big-time CEOs just keep getting bigger and better. But how do they make so much, and has it always been this way? IS IT REALLY HARDWORK OR THEY WORK SMART ENOUGH TO REACH THERE?
People usually complaint that they have to work endlessly for hours and all they get is bad comments and complaints from their bosses and thus ends up being frustrated. They have this feeling that after doing hours and hours of work, they are not getting the appreciation they must get.
Corona virus pandemic has worsened this inequality across the globe. And, low-income and middle-class families have been at a greater risk of health, job losses and wellbeing. These divides have come into sharper focus than ever as awareness grows of the value of ‘essential’ workers – who often have few employment rights and little pay.
Some people see high pay appropriate for visionaries like Elon Musk, but these pay packets are more perplexing for average CEOs, who aren’t exceptional talents.
The roots of ‘price-driven salaries’
If you go back to the early periods, it was very common for executives’ jobs to be part of a company’s overall job-evaluation system. There was only one system to evaluate everybody’s pay. Some analysis of data shows that, an average employee’s salary may increase7- 10%, but the salary of a CEO see a 30-35% rise, in an year.
The underlying logic was to pay the CEO according to a company’s financial performance, since they were the most important factor of success. So, on top of basic salaries, CEOs were given performance-related bonuses and stock options allowing them to buy company shares for a set price, which is somehow not in the hands of lower level employees.
Companies rely on compensation committees, mostly made up of board members and executives from other companies that meet once a year.
Shareholders grew in power, and their demand for booming stock prices led to booming pay packets for CEOs – in turn signed off by boards of directors eager to please their investors.
Walking on eggshells
A study in 2010 in the Journal of Financial Economics concluded this system of compensation committees is accelerating pay inflation “because such peer companies enable justification of the high level of their CEO pay”.
Bonuses were agreed as a way to measure performance, either increasing based on financial measures or provided in sum, if specific goals are met. But is this really for all the employees?
CEO’s works differently, they play smart enough to make use of their mind. The quote ‘you are the CEO of your own life’is quite popular on social media. Every other picture on instagram have this caption for sure. But, are you really the one? Are you seriously taking decisions of your life as a CEO.
The mantra to be on the top is to do smart work. And it’s the greed and the grab.
Whether CEO pay is justified remains subject to fierce debate. On one side, free-market economists argue high executive pay is justified if it aligns with the interests of executives and shareholders. If businesses are willing to pay these sums, they say, that is value that the market thinks the executives are worth.
“Improving those normal peoples’ lives with relatively small increments of money could be transformational,”. “That would be a dramatic step forward.”.
With a global economic recession on the horizon as the pandemic rages on. The growing role of the finance industry, the outsourcing of low-paid work and the decline of trade unions are behind the widening inequality gap over recent decades. “At the same time, those at the top have not only maintained their wealth – but seen it grow massively,”. “If that trend continues, society will become even more divided and workers will suffer.”

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03 Mar 2021, 10:54 AM (GMT)

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