8.Executive Compensation and CEO Pay Ratio.

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                                                                                                (Garber, 2023)

Executive compensation,

With particular focus on the CEO pay ratio as a crucial indicator of wealth disparity in businesses. The CEO pay ratio is a measure of corporate governance and social responsibility that compares the total annual compensation of the CEO to the total annual earnings of the median employee.


                                                                                                                               (Al-Shammari, 2021)

The market competition for top talent, 

Industry benchmarks, and company performance are some of the factors that lead to the growing disparity in executive compensation. Proponents of high CEO pay contend that these factors warrant it, but detractors worry about possible harm to organizational culture and employee morale. 

The significance of HR specialists in tackling the CEO pay ratio,

 

                                                                                    (www.msci.com, n.d.)

Since they are essential in striking a balance between attracting and retaining top talent. Reputational harm, lower employee engagement, and higher turnover can result from an unequal pay ratio. In order to ensure that compensation plans reflect the fairness and organizational values, HR departments are urged to hold conversations with executives and board members.

An approach to address the CEO pay ratio is to share compensation practices in a transparent manner, set salary caps that are reasonable, and implement performance-based incentives that are linked to the overall success of employees. Fostering a culture of fairness and equality is also highlighted as a key factor in creating a healthier work environment.

Conclusion, 

One of the most important aspects of human resource management is navigating the complexities of executive compensation, especially the CEO pay ratio. Businesses that tackle this problem stand to gain from increased equity, happier workers, and a more environmentally and socially conscious workplace.


References:

  • Anderson, S., & Cavanagh, J. (2018). Executive Excess 2018: How Taxpayers Subsidize Giant Corporate Pay Gaps. Institute for Policy Studies.
  • Frydman, C., & Jenter, D. (2010). CEO Compensation. Annual Review of Financial Economics, 2, 75–102. doi: 10.1146/annurev.financial.050808.114244.
  • Garber, J. (2023). How much hospital CEO pay is too much? This city is considering a cap on executive compensation. [online] Lown Institute. Available at: https://lowninstitute.org/how-much-hospital-ceo-pay-is-too-much-this-city-is-considering-a-cap-on-executive-compensation/ [Accessed 15 Nov. 2023].

  • Al-Shammari, H.A. (2021). CEO compensation and firm performance: The mediating effects of CEO risk taking behaviour. Cogent Business & Management, 8(1), p.1894893. doi:https://doi.org/10.1080/23311975.2021.1894893.‌

  • www.msci.com. (n.d.). Out of Whack: U.S. CEO Pay and Long-term Investment Returns. [online] Available at: https://www.msci.com/ceo-pay.

    ‌


Comments

  1. Kasun Thennakoon November 18, 2023 at 6:08 PM

    You have provided a comprehensive and perceptive analysis of executive compensation, with a particular focus on the CEO pay ratio. A comprehensive grasp of the problem is demonstrated by addressing the causes of the widening gap and highlighting the importance of HR professionals in preserving equilibrium. The suggested remedies, which support openness and a culture of justice, give companies doable tactics. Overall, the significance of resolving CEO salary difficulties for a more equal and socially conscious workplace is well communicated by your well-structured talk. Good work!

    ReplyDelete
    Replies
    1. Mayumi WicramashingheNovember 22, 2023 at 9:34 AM

      Dear Kasun,
      Thank you for your thoughtful and encouraging feedback! I'm delighted to hear that you found the analysis comprehensive and perceptive. Your recognition of the importance of HR professionals and the suggested remedies is greatly appreciated. I'm glad the significance of addressing CEO salary discrepancies for a more equitable workplace came through effectively. Your kind words motivate me to continue delivering valuable insights.

      Delete
  2. Mayumi WicramashingheNovember 18, 2023 at 9:44 PM

    Dear Kasun, Thank you for your thoughtful feedback! I appreciate your recognition of the comprehensive analysis and the emphasis on HR's role. Your support encourages a commitment to fostering workplace equity and social consciousness.

    ReplyDelete
  3. V.N. Haputhantri.November 20, 2023 at 4:09 AM

    This insightful article delves into the intricacies of executive compensation, with a keen focus on the CEO pay ratio as a key metric for assessing wealth disparity.
    How to raises crucial considerations regarding market competition, industry benchmarks, and HR's pivotal role in maintaining fairness, transparency, and organizational values in compensation practices?

    ReplyDelete
    Replies
    1. Mayumi WicramashingheNovember 22, 2023 at 9:39 AM

      Dear Vidura,
      To address crucial considerations in executive compensation, market competition, industry benchmarks, and HR's role in fairness and transparency are pivotal. The CEO pay ratio, reflecting wealth disparity, requires HR to balance talent attraction with organizational values, ensuring transparent practices and fostering equality for a healthier workplace

      Delete
  4. Masha Rupasinghe.November 27, 2023 at 1:23 AM

    This article brings attention to the CEO pay ratio as a vital metric in understanding wealth disparity within businesses. By spotlighting the comparison between CEO and median employee earnings, it underscores the significance of corporate governance and social responsibility. What specific strategies or practices does the article suggest for businesses to effectively address and manage the CEO pay ratio as a means of mitigating wealth disparity?

    ReplyDelete
    Replies
    1. Mayumi WicramashingheNovember 27, 2023 at 8:13 AM

      Hi friend,
      The article recommends implementing transparent communication about CEO pay ratios, setting reasonable executive compensation limits, and prioritizing fair wages for employees. Emphasizing corporate social responsibility and governance can contribute to narrowing wealth gaps.

      Delete
  5. SudarshaNovember 27, 2023 at 11:54 PM

    Hi Mayumi.
    This analysis underscores the critical role of HR specialists in addressing CEO pay ratios and emphasizes the importance of transparency, reasonable salary caps, and performance-based incentives to foster fairness and equality in executive compensation. The focus on organizational values and creating a healthier work environment contributes to increased equity and overall workplace satisfaction.

    ReplyDelete
    Replies
    1. Mayumi WicramashingheDecember 4, 2023 at 9:13 AM

      Yes Dear Sudarsha,
      Emphasizing HR specialists' crucial role, this analysis highlights the need for transparent practices, reasonable salary caps, and performance-based incentives to ensure fairness in CEO pay ratios and promote workplace equality and satisfaction.

      Delete
  6. RoshanNovember 28, 2023 at 8:33 AM

    Exactly It is important to address the CEO compensation ratio in order to promote business equity and accountability. HR professionals are essential in maintaining equitable remuneration policies, which promote a better work environment, higher employee satisfaction, and overall organizational performance. They do this by taking into account aspects including market competitiveness and industry benchmarks.

    ReplyDelete
    Replies
    1. Mayumi WicramashingheDecember 4, 2023 at 9:26 AM

      Dear Roshan,
      Absolutely, addressing CEO compensation ratios is crucial for business equity and accountability. HR professionals play a pivotal role in fostering a fair work environment, enhancing satisfaction, and boosting organizational performance through strategic remuneration policies aligned with market standards.

      Delete

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