Matching Executive Salaries to Performance

Executive pay has sparked many peoples' interest as lay-offs continue to grow and earning power declines for the average American. Despite this down tick in the economy, executive pay has continued to increase year after year. The essential "meat and potatoes" of compensation, which is salary, seems to increase despite slumping profits. The American and Chinese populaces are gnashing their teeth at such apparent disparity between average workers and wealthy executives.

An AFL-CIO survey found that 480 CEO's received pay increases in 2008 while 463 CEO's received pay decreases in 2008 (Hill, 2009). The medium CEO salary increased 7% in 2008 while perks increased 13%. The findings indicate that executive pay is still increasing while many Americans have lost their jobs during the recession.

America is not the only place where anger over executive pay may have grown. Chinese websites have been buzzing with discontent over high executive salaries. In response to this mass discontent the government has asked state-owned companies to slash executive pay 10-20% (Dasgupia, 2009). In essence, the government wants to freeze wages until the economy makes a rebound.

Salaries should reflect the performance of the company. If the company is increasing in revenue then few would have an issue with CEO's that made additional salaries. Yet one would still wonder why workers shouldn't also receive some additional pay, benefits, or perks. However if the company dropped 30% in revenue the CEO should not have an increase in their compensation. To do so would send an immoral signal to everyone else.

In order for business to regain the confidence of investors, workers, government officials, and the general public they must come into a much stronger ethical position. Businesses should feel connected to the people who have made them the big international organizations many of them have become. Swimming upstream against the people's wishes will become more difficult as consumers associated behavior with products.

Dasgupia, S (2009, April 14). China slashes executive salaries and perks. Times of India. Retrieved April 14^th, 2009.

Hill, C. (2009, April 14). Labor Federation AFL-CIO finds that more CEO's of got pay raises then pay cuts in 2008. Detroit news. Retrieved April 14^th, 2009.