Saturday, March 03, 2018
Recent studies of how the difference between CEO and worker salaries affect productivity are revealing what many already assumed was true. It's bad practice for CEOs to rake in exorbitant amounts while employees scrape by.
So, what should CEOs make? Having the responsibility of an entire company on your back ought to earn you a healthy sum, right?
Right, but companies need to do a better job of making it clear to employees where all that money is going. A good CEO does this in two ways. First, by managing the pay ratio gap so that employees don't feel they are being treated unfairly. Second, by fostering a positive corporate culture that allows people to develop and grow -- thereby encouraging them to stay with the company.
Backlash occurs in situations where neither of these criteria are met. It's understandable that employees will make less than their CEOs, but when their compensation is comparatively strong compared to their company's competitors, they are much less likely to act out or leave.
In addition to the new SEC regulations, workers will be paying attention to how Trump's tax cuts affect their lives in 2018 and beyond. Only some of the new tax law is guaranteed to help them. During the first three years, people will get more in their paychecks. However, the real takeaway from Trump's changes is a lower rate for companies, which stays on after cuts for lower brackets wear off.
Companies will have to make decisions about what to do with this money. Obviously, the way to improve morale among lower-level workers is to spread the extra cash around, rather than funnel it all to CEOs and upper management. But can we really trust that companies will choose this route?
As much as we love to talk about the American dream and how anyone can get ahead in this country, the indicators of a growing rift between the upper and middle class are dangerous. If you're sitting on the company board and want to keep hardworking people around, you might want to take a second look at where the money's going.
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