Chief executives’ pay: reversing the race to the top

Eye-watering remuneration for chief executives is economically wasteful as well as socially divisive. Non-profits should pioneer compressed wage hierarchies.
By Alex Bird – As Oxfam reports that the top 1 per cent of the world’s population now own more than the other 99 per cent, it’s time to think about how those at the top of the economic tree can secure such eye-watering salaries, which they parlay into wealth.

Whereas in the past individuals became recognized by their status in the community rather than in cash, and for their philanthropy—such as Carnegie building libraries, or business people supporting the local football team—now driven individuals seek recognition through possessing conspicuous wealth.

This recognition drive is reinforced by remuneration committees, which are the method of setting top salaries recommended in the UK by the Financial Reporting Council. They employ specialist consultants to survey what others are paying, adjust for industry and turnover, and so arrive at a ‘market price’. Any executives earning less than this rate get a rise; anyone earning more is left alone, as their contract locks them in to that salary. Industry rivals see this change, redo their own surveys and the upwards-only merry-go-round progresses.

This, naturally, has led to an increasing disparity between the highest and average earnings. more>

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