The typical compensation of the CEOs of the top S&P 500 companies has ballooned over the last decades, and the incremental increase in year-on-year measures has created a massive paycheck gap between the senior leaders and the workers in the entry-level positions of the company.
The difference becomes more evident when we can witness that the median packages of the CEO in the last year have risen by 13% at the same time, the private company worker’s salaries at a median level have risen by 4.1%.
A company can hire an IRS payroll audit to do the right checks and balances, which will allow the company to remain straight in front of external authorities. Since it’s related to paycheck, a company must maintain the payroll to keep transparency.
It shows even on an incremental basis also, the percentage point is on the higher side of the CEO, and that creates a heavy difference in the company which might hamper the productivity of the company.
Factors Which Affects the Pay Gap Between Executive and Workers
Multiple factors are there where a person might feel burnt when they witness the rise in the CEO’s paycheck a multifold times and thus affects the morale of the company. There are multiple reasons for which the rise in the CEO’s pay happens in an organization.
- The Availability of stock options for CEOs
Stock options are a way for a CEO to increase the company’s profits and growth prospects, where they can witness the rise in the share market, which allows the CEO of the company to sell a certain amount and get fairly compensated.
Here, an executive will have the ability to attain a large paycheck as they have the stock options of the company, and the employees don’t have the chance to match that income due to the stock returns.
- Executive Compensation
The executive packages for the top employees of the organization allow the CEOs to get a large paycheck as bonuses, and that leads to extra perks that other employees necessarily get due to higher performance.
- The Lack of Supply in Top Talent
The sheer demand for senior executive positions allows the company to take CEOs who want high paychecks due to this supply crisis. A company needs a good senior management team to run the business comfortably. Thus, the promoters are eager to pay for the company CEOs as they drive the mast of the business.
The Negative Impacts of This Pay Gap in a Company
A company might face a lack of motivation in the work when the pay disparity is soi huge in an organization. Even the authorities can sometimes barge in and force the company to make some changes. Here, a company can hire a tax attorney from Riverside, CA, or from another location who can fix these issues and make the board make a fair decision for the company.
These are some of the factors that a company can face when there is a massive pay gap between the executive and workers of the company.
- Lowering of employee morale
- Creates a layer of social inequality
- Alters the public perception of the company
Therefore, a company must always consider the long-term objective, vouch for the right talent at every level of the organization, and compensate them based on performance.