There are two kinds of employees in an organization: executive and non-executive. Executive members are those members who occupy top level positions in an organization and are involved in major decision-making procedures, planning, strategy, policy making and other managerial processes. A non-executive employee does not hold any managerial position and works under the instruction of the firm’s executives. There is a major disparity between the executive and non-executive pay.
The executive employees’ salary includes the basic salary, bonuses, shares and all the other company benefits and is way above that earned by the non-executive employee. The issue of the executive pay has been a growing concern recently, with low-cadre employees alleging that these executives are overpaid yet they do very little work. The issue came into light during the recent global recession that hit the world’s largest after it emerged that companies were using the bailout money to pay huge bonuses to their executives while the other employees were being downsized.
Compensations given to senior executives has risen to very high levels, further widening the gap between the executive and the executive despite the latter doing more work than the bosses do. A study conducted in the US in 2008 revealed that a CEO earned roughly 320 times more than the average employee, a very large disparity in comparison to a figure of 42 during the 1980s.
There have been calls for government to step in and regulate salaries paid to executives; this has been resisted as it would amount to government interference in private ventures. Some companies have therefore opted to shareholder committees that approve all compensation plans, yet, some companies’ independent remuneration committees to look into salaries.