Are CEO's Paid Too Much? OUTLINE This report explores the issue of the pay that top executives make, and the reasons why they do. It also suggests improvements that can be made to make the system better. High Pay Seems Small When Compared To Company Profits Many companies pull in profits that are extremely high. When an employee of such a companies salary is compared to the amount of profit that the company earns, it starts to seem reasonable.
Big might be sometimes better, but companies, corporations and monopolies can get too big. “Some merged companies become so huge that they lose focus, gain overhead and increase their expenses dramatically. Ultimately they can be less innovative and competitive than before.” Big companies tend to care only for making money and devalue things such as the quality of the product they produce. “Smaller companies by contrast, can hold some clear advantages. They are leaner, more focused and nimble than giants and relatively speaking, the can be more profitable.” Smaller companies, I believe, are out to make a living and care for the consumer’s satisfaction more then just the money they will receive.
When the wage of the employees is increased from $7.25 many companies would try to recover the extra expense by simply raising the price of their products. When the price goes high the society is the one at a disadvantage because the final products will be getting to them a relatively higher price of which they have no other option than to pay. The wage increase results to the disadvantage of unemployment because when the company raises the wage of which there is no increase in performance from the workers, the company will narrow down to those skilled and employed workers and expel those with no good experience which disfavors the young
1. Tax Cuts Caused Income Inequality Income inequality is a big problem in the United States because the top, wealthiest American saw huge increases in their incomes, which the rest had their incomes go down. Bottom people do not have the same amount of money and the opportunity to move up the social ladder as the rich people do. In order to reduce income inequality, the government needs to tax the rich people more, and give poor people more money and more social services - education, food subsidies, health care. Tax cuts are only benefiting the richest people, and will widen the inequality gap between the rich and the poor.
Senior executives effectively pay themselves through lucrative compensation contracts, supposedly linked to company performance, negotiated with compliant or passive boards that abound with conflicts of interest. In effect, wealthy and powerful corporate elites are able to arrange their compensation with minimum external oversight or transparency that effectively firewalls senior management from an organisation’s internal labour norms and values at the expense of the workers (Sikka, 2008). Rather than performance, evidence indicates that the increase in senior executive pay is linked to increasing the firm size, even when the firm’s market value is reduced which “could explain some of the vast amount of inefficient expenditures of corporate resources on diversification programs that have created large conglomerate organizations …” (Baker, Jensen & Murphy, 1998, p. 609). BP was no exception and achieved its conglomerate status when the then CEO Lord Browne financially engineered massive takeovers a... ... middle of paper ... ...her BP had not effectively shown that it held supervisors, senior executives, and line managers accountable for safety performance across its five US refineries. The report pointed out other weaknesses with BP’s safety performance, in contrast to the portrayal in its sustainability reports of a company genuinely committed to the safety of its workforce.
Inequality in America I believe that there is too much wealth and income inequality in the United States today. The upper classes have most of the power in the nation and use their influence and wealth to convert the United States income into benefiting their well being and financial stability. In the last fifteen years, the income of the upper classes has risen while the income of the lower classes has generally lowered, further showing the inequality that exists in our nation. It is usually difficult for the lower classes to achieve financial success because a high income job requires good education which the lower classes lacks because they cannot afford it. In the United States there are four social classes : the upper class, the middle class, the working class, and the lower class.
Rise of Inequality in Society In "Some Principles of Stratification", Davis and More define the functional theory of stratification as the notion that societies need inequality in order to fill the important occupations wanted by society. The best people need motivation to take the most important jobs, and that motivation comes in the form of rewards, usually a higher income. However, this theory does not explain why inequality in the United States has been on the rise. In William Wilson's The Truly Disadvantaged, Frank Levy explains that the increasing inequality is a result of money-making power shifting from the average worker to the shareholders. Today, the highest paying jobs are not necessarily the most important ones.
The higher the minimum wage would make it almost impractical for American companies compete with other low-paying foreign countries. Another reason raising the minimum wage would decrease unemployment because according to High Pay, Fewer Jobs (Douglas Holtz Eakin and Ben Gitis) “The other two models point to even bigger losses, indicating that a $15 an hour minimum wage would lead to 432,200 and 588,000 fewer jobs under the “medium impact” and “high impact ”scenarios, respectively.” Additionally, according to COUNTERPRODUCTIVE: The Employment and Income Effects of Raising America’s Minimum Wage to $12 and to $15 per Hour (Douglas Holtz-Eakin &Ben Gitis) “$15-per-hour minimum wage could mean the loss of 6.6 million jobs” which in that case would not help the economy or the
Further, it may be in the interests of the company to structure pay so that the winner makes very large sums as a way of spurring on those lower in the hierarchy. The primary reason for the high pay given to the CEO may be to give those lower in the hierarchy an incentive to work hard, not to give the CEO himself the incentive to perform well. The argument that winner-take-all contests tend to over-attract entrants closely parallels the argument that the problem of the commons yields inefficiency: people respond to average benefit rather than to marginal benefit.
Introduction For many centuries, technology has encouraged growth: through increases in inequality and the market labor. Economists say that structural unemployment “occurs because workers don’t have the particular skills demanded by employers.” (Structural Unemployment: The Economists Just Don 't Get It. (2010, August 4)) There are many who question if technology has indeed raised or increases structural unemployment or if it hasn’t worsened the situation (by machinery taking over the jobs of humans for example or jobs that need a particular set of skills). But let’s say that technology changes do increase structural unemployment, why do most governments and economists encourage such change? This I will answer below.