Friday, September 24, 2010

The Great Divide

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The Grand Canyon (west rim) There is an alarming and growing divide between the top of the org chart in Corporate America, and the bottom. The Senior Executives – the CEO and those within one or two steps of that position, are becoming an increasingly elitist group.

The Institute for Policy Studies recently released the 17th Annual Executive Pay Compensation Report, which shows that CEO pay has skyrocketed since the early 90’s (shortly after many corporations abandoned their full employment policies). When adjusted for inflation, CEO pay more than doubled from the 80’s to the 90’s, and more than doubled again from the 90’s to the 2000’s. In 2009, median CEO pay was $8.5 million, compared with $1.8 million in the 1980’s.

But what abut the employees of these companies?

The study notes that workers are taking home less in real wages than they did in the 1970’s. And then there is the nearly 10% unemployment rate, a fact that these outrageously overpaid CEOs have contributed to – big time. Fact: the most highly compensated CEOs laid off the most workers.

What does this great divide look like? Here are a few examples:
  • The senior executive is worried about whether he will get his entire multi-million dollar bonus this year, while the employee is worried about how he is going to pay off his debt.
  • The senior executive is worried about how well-positioned he is for the next CEO job, while the employee is worried about how long he will be able to keep his job.
  • While the senior executive is comfortable in his lavish gated community home, the employee is struggling to save enough for a down payment on a house.
  • Disgraced CEOs leave their posts with multi-million dollar severance packages, while the laid-off worker is left to scrape by with unemployment payments and a few months of salary – if they are lucky.
The view from the top of the org chart has become far removed from the reality of the bottom. Isn’t it time for CEO responsibility to include their employees?

Photo by Kyle Simourd


Anonymous said...

I think that if someone or a group of people BUILD a company up from nothing then they probably deserve whatever they get. They put a lot on the line and they get to reap the benefits. That's the American way!

However, I suspect that in this case we are talking about execs that come into and are part of an established company.
They didn't really risk anything in most cases so I have a hard time understanding why they think they are worth so much more than the crew.
They might argue that they have more responsibility, that we (the workers) could not do their jobs but the thing is, they could probably not do our jobs either (I'm talking about skilled jobs here, not sweeping up!).
Basically, without the workers (us) the company would be nothing. In the same way, without a competent leadership in place a company would be nothing.
Fact is that we need them and they need us. I don't see how they can justify their excessive pay and bonuses at all. Why not take that money and distribute it to all the employees or plow it back into the company so that the company grows and everyone benefits.

Oh I forgot, we are talking greed here! Why does someone need several million a year to live. Don;t get me wrong I'd like it as much as you would but I don't NEED it and I suspect neither do they. It's just ego.

Oh well, back to the grind. At least I DO have a (pretty well paid) job. Gee maybe I should be an exec and pay myself more!

SteveB said...

I am so outraged by this subject that I unable to post any comments.
Creators deserve to be rewarded well; Perpetuators should be rewarded commensurate with their ability to create new long term value, which they rarely do. The worst offenders have no conscience - for goodness sake, how much $$ do you need? And they give capitalism a bad name. But there are some good guys: I sold IBM and bought BRK-B.

Colette said...

Anonymous - I agree, there is a difference between those who create and lead their own business and those who are hired by a board. I find the first group tends to be more likely to take care of their employees.

SteveB - good point -- we can vote with our $$.

Anonymous said...

If - is a little word, with a big meaning.

If you have a choice of working for a company with executives who value their employees, or a company with executives who are paid salaries far in excess of their value, then please for the sake of the rest of us, work for the good guys.

Many years ago IBM was a good company to work for based on this criteria. It is no longer. There are however many companies who are.

If you own shares, please vote with your $$. If you have choices about the companies you purchase from, please vote with your $$. If you have choice about who you work for, vote with your labour.

Votes can count.


Colette said...

Peter, I love the idea of voting with your $$. And even if you don't own shares, there are ways to do this -- like where we choose to spend our hard-earned money and which companies we support.