The Wage Disparity That Exists Between Executives And...

EXECUTIVE SUMMARY This report examines the starting wage disparity that exists between executives and employees and the adverse implications that this disparity has on the economy. Thirty years ago, the average executive in the United States earned 42 times what the average employee made. In 2012, the average executive earned 354 times what the average employee made. Canada has similar wage disparity ratios, also trending with an increase in the ratio as the years progress. In contrast, Japan’s executives made 16 times what the average worker made. A company’s board of directors, specifically its compensation committee, is responsible for determining executive compensation. Much of that power is subjective, and various studies have shown that the compensation justification is both fair at times or unfair at other times. The components of executive pay are base pay, bonuses, and long-term incentive plans. Several hypotheses on pay justification were derived from James B. Wade at the University of Illinois. Generally, the greater the shareholder involvement, the more market performance is emphasized; the greater the incentive bonuses are, the more accounting performance is emphasized. The fast food industry has the greatest wage disparity between CEOs and employees, with CEOs earning more than 1,000 times what the average worker makes. At an average wage of $9.09, even a full-time fast food worker would only make $19,000 in annually. Fast food workers have organizedShow MoreRelatedCommunity College Leadership Gap Analysis8105 Words   |  33 PagesDe-Frank, 2014, Eddy, 2013, Eddy, 2015, Enke, 2014, Floyd, 2016, Fujii, 2014, Gardner, 2013, Goltz, 2013, Grasmick, 2012, Hannum, 2015, Jones, 2015, Lennon, 2013, Morley, 2013 2014, Ortega, 2014 and Tartari, 2015), which is related to the gender wage gap (Claus, 2012, Cornacchione, 2013, Dahlvig, 2013, Enke, 2014, Goltz, 2013, Lennon, 2013, Morley, 2014, Tartari, 2015, Tekle, 2012, Pitts, 2014, and Bell, 2014). 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