According to a report from the Economic Policy Institute, CEOs at the 350 largest companies earn an average if $15.6 million, approximately 300 times more than an average worker. Researchers stated that the only way to eliminate the unfairness between the huge wage gap between the CEO and average employee is by using taxation. The federal government needs to come up with a higher tax rate for high-income CEOs and further prevent tax cheating.From another perspective, most of the CEOs’ base salaries only take up about less than 30% of their compensation, the rest of the 70% comes from options grant, long-term incentive plans, deferred, cash compensation, etc. It has been a tradition to determine a CEO’s total compensation by combining all these.
The highest paid CEO in Canada, Joseph Papa, has a total compensation of $83,131,252. However, his base salary is only about 15% of his compensation, which is $1,299,990. When we use the base salary of the CEOs to compare with the normal workers, the differences won’t be as huge as hundreds of times.Target wasn’t doing well in 2016, and this resulted in its CEO, Brian Cornell, taking a massive pay cut. His compensation was $28.
2 million in 2014, which decreased to $11.3 million in 2016. Their CFO Cathy Smith’s compensation fell by 41.
3% as well. This compensation is based on their performance. As the company performs better, the more compensation they can get, vice versa.Sometimes, shareholders are dissatisfied with the amount of high-level executives are being paid since their work is not proportional to the outcome. For instance, the CEO of Cathay Pacific got a 4% increase in his compensation even though the company had a deficit year. It is totally understandable people want to set a limit on CEO pay.It is hard to set a limit on CEOs’ pay since different companies have different policies and structure.
Therefore, there is not an actual number to tell whether their compensation is too much or too little. And they are the valuable resources of their companies, their leadership and skills need competitive compensation to recruit them. As the leader of the company, they deal with more stress as well. According to a research done by CEO.com, for 256 CEOs, in average they work about 60 hours a week. However, there are certain ways to make sure that the CEOs aren’t overpaid. The percentage increase of the CEO’s compensation should not be more than the growth of the company.
Their pay should be equivalent to their input. Knowing that the compensation is related to the company’s performance also gives them the incentive to work harder. CEO’s compensation plans are usually approved by the company board of directors. They are responsible to the shareholders and the company and should prevent CEOs from being overpaid.On the other hand, for the public sector, the salaries of our prime minister, Justin Trudeau, has been increased this year from $340,800 to $345,400. The increase rate is about 1.5%, which is within the rate of the inflation. By comparing his salary to the salary of another world leader, Justin Trudeau’s salary might be just right.
The US president Donald Trump’s annual salary is about $500,000; the president of Germany however has about the same salary as our prime minister. Again, there is no standard of how much leadership is worth. Even though limits are set for the leaders in government, they will always find a way to earn more such as donation.Overall, the performance base is the most efficient and fair way to decide the compensation of the executive. It gives the executives incentive to do better and is able to prevent them from working for other companies for better pay. In conclusion, the cause of the huge gap between the wage of the leaders and average workers are the bonuses, not the base salary.