Closing the Executive-Employee Income Gap

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The banker John Pierpont Morgan, founder of JP Morgan, once said that no one at the top of a company should earn more than 20 times those at the bottom. Among FTSE-100 companies last year, only two chief executives met Morgan's mandate.
Employee Engagement Strategies

The banker John Pierpont Morgan, founder of JP Morgan, once said that no one at the top of a company should earn more than 20 times of those at the bottom. Among FTSE-100 companies last year, only two chief executives met Morgan's proclamation.

Last week, Dan Price, the much lauded CEO of payments firm Gravity, brought attention to the great debate over the growing income disparity between executives and employees when he raised the minimum salary of his employees to $70,000 and reduced his nearly $1 million per year pay to $70,000. The resulting discussions spotlighted how the pay gap between top bosses and their staffs continues to widen.

According to some recent studies, CEOs in S&P 500 companies took home an average of $11.7 million in 2013. And according to a 2014 Economic Policy Institute study, chief executive pay rocketed from an average of 20 times in 1965 to 295.9 in 2013.

Price's announcement not only spurred discussion around the widening income gap, but also on how salary impacts happiness and emotional health. It begs the question: Is it executives' moral imperatives to follow suit and do the right thing for the people they're leading in pursuit of a less distracted and more engaged workforce?

These companies are also part of this growing trend:

Volkswagen: In 2012, feeling the CEO's pay was too high, employee board members forced through a 20 percent pay cut for their CEO despite record profits.

Container Store: The company pays its retail workers an average of nearly $50,000 a year.

Lenovo: The CEO Yang Yuanqing shared $3.25 million of his bonus with workers in 2013.

U.S. Congress: In 2010, members approved the Dodd-Frank law requiring executive pay disclosures. The idea was to expose how wide the gap was between a company's chief executive and its rank-and-file workers.

Europe: Many countries introduced communal pay cuts, resulting in Switzerland, France, and Poland recording decreases in pay gaps last year of 3.3 percent, 5.6 percent, and 12.8 percent respectively.

Top chief executives worldwide often take home far more in one year than most people will earn in their entire lifetime. Price's policy isn't just great for his employees and for the company's marketing efforts; it also spurred an important conversation for businesses and policy makers to develop measures to stop the growth of pay gaps, and to share the rewards of companies' successes more fairly--for everyone's benefit.

EXPERT OPINION
EXPERT OPINION