The average compensation of Chief Executive Officer’s has risen to stratospheric heights in the recent years. In 1965, the ratio between CEO pay and the average company pay was 24 to 1. By 1980, the ratio had increased to 40 to 1. In 2000, the ratio skyrocketed to 300 to 1 and has bounced around considerably in the last decade. The public considers this to be disproportionate and inequitable executive compensation. There is a debate about whether CEO salaries are excessive or fair and market-based. The question raised is if CEOs are worth their inflated salaries and if not, are there alternatives to the constant escalation of executive compensation. Using Davis and Moore’s Principles of Stratification and Karl Marx, we will analyze cause and effects of increasing CEO salaries and it’s prominence as a current class and inequality topic.
The criticism of Chief Executive Officer salaries comes from a chorus of shareholders, the business media, policy makers, and academics. The criticisms focus on CEOs not only because they are the highest paid executives but also because their compensation sets the standard for those beneath them. Whether CEOs are paid too much is highly contested. Some shareholders, politicians, and the public believe that executives are overpaid, while other shareholders and board members disagree. What cannot be argued is that American CEOs make more money than CEOs in other countries - due mostly to greater reliance on incentive pay – and increasingly larger amounts than the average employee and their subordinates. Because of this, it is clear that the rise in executive salaries contributes to the skewing of income distribution in the United States and furthermore, income inequality.
Kingsley Davis and Wilber...
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...cutive salaries because while the CEO’s salary is increasing, the average workers salary is staying the same in turn creating large gaps in income inequality.
When looking at the inflation of executive compensation one can safely say that people are uneasy with the growing income gap caused by CEO salaries. Though Davis and Moore claim that these salaries are positively functional for society because it brings the qualified people into the highest positions, it can be argued that are a number of functionally necessary jobs that are being compensated much less. Karl Marx states that wages and salaries are created on the basis of human needs, but for CEOs to be making millions exceeds what humans need to survive. Examining this information, it is clear that the soaring salary of executives needs to be tamed before the issue of income inequality becomes irreversible.
3. What are the effects of this wealth inequality in the US and what causes it, as well as some possible solutions and their ramifications, will all be discussed and answered below. There has always been a wealth gap between the richest and poorest in society. However, in the past decade, the wealth gap between the richest and poorest citizens in the US has been growing rapidly. In the 70s and 80s, the wealth and income growth rate for both poor and rich people were similar, however, between the years 2009 and 2012 the top 1% income increased 31% while for the bottom 20%, their income actually dropped and for the vast majority of Americans, the average yearly income only increased by 0.4% [4].
Year’s ago, mention of this widening gap between the privileged and the struggling was considered “Marxist”, but now the facts are too evident to be blamed on a belief. The richer continue to get richer and the poorer get poorer; due to the fact that, the wealthy pay the labor working majority unfair wages. Ironically, this “supreme” group makes their fortune because of these under paid people. For example, Walmart a low paying corporation owned by the wealthiest family in America. As previously stated, the success of the upper class is at the expense of the lower class and we see this in more ways then one: late fees and rates are collected by the rich, Realestate is bought up by them, and they have control of politics. The solution seen most fit by Ehrenreich and Lowenstein would be to remove the classes and have an egalitarian
Throughout the years, “ U.S income inequality has been increasing steadily since the 1970s and now has reached levels not seen since 1928” (Source A).
Income inequality has been and will forever continue to be a highly discussed topic in society. As a social experiment, income equality has historically failed. The adage from the communist era “from each according to his ability; to each according to his needs,” ran counter to human nature and experience. On balance, there are positive aspects to unequal income which include; its success in creating a more educated work force, competition among people to succeed and more stimulated productivity, which do not always, but tend to balance out any negative impacts such as; concentration of wealth, social consequences and outsourcing, that it may have.
a. This is unacceptable in a time when the top one percent of income earners have seen an earning increase of 250% since 1979, while at the
The top 10 percent, and even more so the top 1% , are going through increases in income expon...
Americans have financially and politically. Much of the financial gains made today go to the top one percent of earners in the United States. This increase in inequality has grown substantially in the last forty years. Wage inequality is different than the push for equal pay. According to Fortune.com, the salaries of CEO’s compared to the average worker are 300 times more (Addady 1). One of the reasons CEO’s are profiting more money is because technological advances are replacing human labor with robots or software. This investment in technology by firms increases the bottom line and is ever more important with the rising minimum wages set by local, state, and federal
In the United States there are four social classes : the upper class, the middle class, the working class, and the lower class. Of these four classes the most inequality exists between the upper class and the lower class. This inequality can be seen in the incomes that the two classes earn. During the period 1979 through the present , the growth in income has disproportionately grown.The bottom sixty percent of the US population actually saw their real income decrease in 1990 dollars. The next 20% saw medium gains. The top twenty percent saw their income increase 18%. The wealthiest one percent saw their incomes rise drastically over 80%. As reported in the 1997 Center on Budget's analysis , the wealthiest one percent of Americans ( 2.6 million people) received as much after-tax income in 1994 as the bottom 35 percent of the population combined (88 million people). But in 1977 the bottom 35 percent had about twice as much after tax income as the top one percent. These statistics further show the disproportional income growth among the social classes. The gr...
Mandelbaum, Robb, “There is a Salary Gap when pay themselves”. New York Times. Ed. Abramson Jill, Pub: New York City, February 18, 2014
The largest reason for the growing gap between the rich and the working-class people was the sudden increase in manufacturing during the 1920’s. The people of the working class were significantly increasing their output, but their wages only increased slightly. For example, the average worker out put from 1923-1929 increased about 32%, but the average income of the worker only increased about 8% (Gusmorino, Main Causes of the Great Depression). Therefore one may conclude that wages only increased one-fourth the amount production increased. Another amazing feat of the manufacturing increase was that prices for goods stayed the same, therefore the executives in the companies were keeping the mass amounts of profit that were now coming into the company. In fact, one can see that top executives in a certain company increased significantly because their salaries from 1923-1929 rose 64% (Gusmorino, Main Cau...
Imagine being in a world where people are paid in cash bonuses, stock options, or generous severance pay when fired from their job due to a company merger, are asked to leave, or choose to retire. This happens to be a reality for many CEO’s and top executives of companies. We live in an economy where mergers and take over’s have become common, and to allow this option for the highest paid employees of a company is arguably unfair. While researching golden parachutes, I formed questions due to the circumstances surrounding this executive option. For example, why should CEO’s, who live very comfortably, be given a compensation package for losing their position due to a company merger or retirement when employee and shareholder’s futures are at stake? Is it fair for the rich to get richer when numerous employees below top executives are dealt the same fate from a merger and shareholders’ investments are at risk but neither receive a form of additional compensation? Of course, there’re those who support the issuance of golden parachutes, arguing they can persuade a possible company merger to not take place due to the costs associated with a top executives golden parachute package. Another supporting point for golden parachutes is, they can make it easier for higher up executives, like CEO’s be absorbed into the future merged company. I will be addressing the point of whether CEO’s and other executives deserve to be awarded a Golden Parachute option by their company. As well as a brief background of Golden Parachutes and my stance on them. They’re a very important part of our growing economy and will always be considered in a merger/takeover if awarded to executives.
Time and time again we hear politicians and office holders preach the need for a powerful middle-class. You may then be surprised to hear that “about 82% of America’s net worth belongs to the top 20%, the next 80% of people only own about 18% of America’s wealth” (UCSC). Some may argue that this disproportion is the beauty of capitalism, the chance to create an empire. I argue that the proportions are simply unfair. Why is it that “ the average CEO makes 350X as much as his/her employee” (UCSC)?
This paper will discuss the reasons why CEOs are not being overpaid. It will apply the utilitarian ethical principle to many a few aspects to CEO compensation and whether or not it is justifiable for such pay. The paper will look at whether or not their performance is justifiable for the pay because they play such a big role in the livelihood of the company along with the principle agency theory and how it is being addressed for the benefit of the shareholders and others involved with the company, the supply and demand of the CEOs, and the paper will describe the comparison of other professions to help link the idea of CEOs being fairly compensated.
The gap in wealth between the rich and the poor continues to grow larger, as productivity increases but wages remain the same. There were changes in the tax structure that gave the wealthy tax breaks, such as only taxing for social security within the first $113,700 of income in a year. For CEOs this tax was paid off almost immediately. Free trade treaties broke barriers to trade and resulted in outsourcing and lower wages for workers. In “Job on the Line” by William Adler, a worker named Mollie James lost her job when the factory moved to Mexico. “The job in which Mollie James once took great pride, the job that both fostered and repaid her loyalty by enabling her to rise above humble beginnings and provide for her family – that job does not now pay Balbina Duque a wage sufficient to live on” (489). When Balbina started working she was only making 65 cents an hour. Another huge issue lies in the minimum wage. In 2007, the minimum wage was only 51% of the living wage in America. How can a person live 51% of a life? Especially when cuts were being made in anti-poverty and welfare programs that were intended to get people on their feet. Now, it seems that the system keeps people down, as they try to earn more but their benefits are taken away faster than they can earn. Even when workers tried to get together to help themselves they were thrown
...e the rich have increased. The fact that wages have dropped dramatically for the working class says that the rich are more important than the middle working class.