Problem

Excessive salaries of corporate executives

Other Names:
Overpaid business executives
Excessive salaries of corporate directors
Exhorbitant executive payouts
Exhorbitant golden handshakes
Corporate perks
Fat cat pay raises
Corporate indulgence
Unjustified pay rises
Incidence:

Over the past decade the pay of top executives in the USA has increased by an average of 12% a year while production workers' pay has increased by only 6%. In 1980 remuneration of corporate chairmen in the USA averaged 35 times that of a typical worker, but that this had risen to 135 times in 1990. In 1994 in the UK it was reported that the net pay of chief executives had increased by 645% since 1978/79, namely 66% more than the rise in their gross earnings, while that of average earners rose by 409%, namely 6% higher than the growth in their gross earnings. A survey in 1993 in the UK suggested that a typical basic salary of a corporate executive of £158,000 per year could be increased to more than £260,000 by perks such as bonuses, cars and pension contributions.

In 1994 the top executive of a major UK company received a golden handshake of £3.2 million after being with the company for only 21 months. In 1993 it was reported that an arbitrator at a Japanese bank was earning £9 million per year, and the founder of a company was paying himself £13.5 million a year and £7 million in dividends. In 1994 it was reported that senior directors in privatized utility companies in the UK had amassed a paper wealth of more than £110 million from share option schemes, enabling them to make more money from these than from their much criticized salary increases. In 1994 a major UK bank announced bonuses totalling £100 million to its high-flying brokers and dealers two days after sacking 400 employees as part of a cost cutting drive.

Claim:

Huge pay rises of executives make it more difficult to slap down inflationary wage demands from the trade unions.

Counter Claim:

As a response to widespread criticism, executives are increasingly offered the option of purchasing stock in the corporation, usually an amount calculated as a multiple of salary, depending on rank. Increasingly corporations are requiring that chief executives purchase stock in order that they should have a significant portion of their personal wealth at risk in the enterprise they control.

Strategies:



Problem Type:
F: Fuzzy exceptional problems
Related UN Sustainable Development Goals:
GOAL 8: Decent Work and Economic GrowthGOAL 12: Responsible Consumption and Production
Date of last update
23.07.2019 – 21:31 CEST