Is this disparity in compensation ethical? Why or why not?, assignment help

User Generated

ebffl

Business Finance

Description

will be passed through turn it in

Write a paper of approximately 750 words that addresses the following prompt: The average U.S. CEO was paid approximately $12.94 million in 2011, while the average U.S. worker’s pay was approximately $34,000.

    • Is this disparity in compensation ethical? Why or why not?
    • How much of a disparity in compensation would be fair or ethical between a CEO and  a worker?
    • What factors justify the average rate of pay for a CEO? What factors make the average rate of pay for a CEO unethical and/or unfair?
    • If you believe that the disparity in pay between CEOs and the typical worker is unethical, what recommendations would you suggest to make pay more fair or ethical?
    • How does this disparity compare to that of CEOs and workers in countries outside the U.S.?

User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Attached.

Running title EXECUTIVE PAY

1

EXECUTIVE PAY
Student Name
Institution

Running title EXECUTIVE PAY

2

Disparity in compensation between executive and workers has become a major concern
over the past decade, due to political reasons and economy slowing down in the United States
and all over the world, this has led to urgent need to curb on executive pay through regulations.
Executives’ compensation package may include cash, equity, among other forms. Studies show
that market forces majorly influence process and decision of corporate boards make as regards
the executive pay packages. The same also indicates that such market-based and competitive
executive pay model are very effective especially in the United States and that’s why boards
work hard to determine the right executive incentives in order to attract CEOs to achieve
maximum performance for their corporation..
Is this disparity in compensation ethical? It is morally permissible if such compensation
packages are truly voluntary actions of all stakeholders and corporation directors. Nonetheless,
high amounts of compensation are usually linked unethical behavior of the chief executive
officers (CEO) that occurs over time (Hart, David, Shao, & Westermann-Behaylo2015). Their
unethical behavior can only explained through two processes; the normalization of bad
behavior to ensure their continued pay levels and employment, and the willingness of the
corporation to reward CEOs for short-term successes without considering the long-term
distress that might be caused.

Running title EXECUTIVE PAY

3

How much is too much for executives is subjective matter and therefore it varies from
corporation to corporation and one may argue it can also vary from country to country.
However, growing concerns as regard the disparity between executives and average workers
threatens morale, which in turn justifies why there is need to have an average rate of pay for a
CEO in the United States.
Currently, there is no universal formulas for determining the executive pay.To achieve
fair compensation an ethical guideline must be established to guide corporations to make
decisions that not only just for executives but for all employees under the corporation. The
following factors justify the average rate of pay for executives.
Executives are employees just like any other average worker in a corporation and this
necessities their compensation packages should be based on reasonable compensable factors
just like for professional such as advocates and/or any other white collar professions. Wage
surveys show that most of the workers in other professionals receive compensation packages
that seem quite legitimate, this is achieved through Job evaluation systems and such systems
and/or methods should adopted to guide corporations to make decisions for executives for
executive’s compensations. It should be noted that their pay should be reasonably higher than
for average workers but ethically guided to curb on disparity and income inequality that may
result from high pay.
Unethical factors should be avoided in compensation considerations and the following
recommendations may be considered. It is myth that executives are indispensable and therefore
are devising of high pay and lavish, market conditions should not be major and sole Criteria
for determining executive compensation. Executives should not be treated like Professional
athletes or entertainers this is because their compensation packages are not based on job-related
compensable factors but rather on the laws of supply and demand, hence the high pay.

Running title EXECUTIVE PAY

4

In conclusion, in the United States market-based and competitive executive pay model
is used to determine compensation packages for the executives and these often include cash,
equity, among other forms, this is found to be very effective way to motivate the performance
of CEOs. It should be noted that there are high disparity levels betw...


Anonymous
Awesome! Made my life easier.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Related Tags