The Pros And Cons Of Executive Compensation

“Equality is about how wealth or income is distributed between employees within a company” (Ferrell, Fraedrich, & Ferrell, 2011). One of the fundamental elements of fairness is reciprocity, which is the act of giving and receiving of items close to equal in value (Ferrell et al., 2011). Thus, one of the primary ethical issues amongst organizations is the salary of executives in comparison that of workers, for example an executive making 200% more than an employee. Is that fair? An executive would probably say yes, but the worker would not. One such remedy would be to hire an independent accounting firm to conduct an audit of salaries in comparison to work performed (Wilson, 2015).

Unfortunately, the nonprofits tend to have six areas where ethical issues emerge: compensation, conflicts of interest, solicitation, financial

Namely, it depends upon how the executive’s compensation package is compiled. Therefore, if executive compensation is based solely on performance then there is a real danger of reducing the social values of the executive (Ims, Pedersen, & Zsolnai, 2014). Thus, compensation must “go beyond traditional economic rationality in which employees and organizations are mainly perceived as instruments to produce increased profits and financial wealth” (Ims et al., 2014, p.

For example, the Whole Food Market adopted a total cash compensation, including bonuses, for top managers which said their total compensation cannot be higher than 19 times of the average pay of the employees (Ims et al., 2014). Ultimately, executive compensation packages like this create a culture of fairness and executives who desire to work for a company for a greater purpose (Ims et al.,