When it comes to compensating corporate executives, when is it not okay to pay in a particular way?
For those who find themselves at the top of the corporate ladder it has become both accepted and expected to receive salaries based on favorable terms that can bear little resemblance to those offered other employees. Such compensation packages are typically legal agreements between two consenting adult parties. Moreover, they are often regarded as necessary for obtaining, motivating, and retaining the sort of top-notch talent that is necessary to keep a business organziation competitive in today's market.
Despite being voluntary agreements, executive compensation packages have been accused of being unjust for a variety of reasons. Some argue that there is something fundamentally unfair about executive salaries that dwarfs that of those at the bottom of the corporate ladder. This is particularly so in the United States, where the ratio of CEO pay to the lowest employee salary has gone up from about 40-to-1 in the 1970s to as high as 400-to-1 in recent years, while remaining around 20-1 in Europe and 10-1 in Japan. They question whether the relative value of executive contribution truly justifies such dramatically differet levels of compensation.
Others argue that executive compensation packages often ignore the standard metrics that usually go into a fair assessment of the salary one deserves: proven capacities, effort, actual performance, past and present contribution to the company's well-being. To ignore these metrics, they claim, is to arbitrarily and unfairly treat the compensation of executives differently than those of other employees.
And then there are concerns about incentive structures that motivate executives to pursue short-term goals linked to bonuses. Such structures may lead to risky behaivors that could harm the well-being of companies, the profits of shareholders, or the general social welfare. Many have blamed the Great Recession on such practices in the financial industry. Can incentive structures be immoral because of potential abuse or harmful consequnces?
When is it not ok to pay in a particular way?
LIST OF SUGGESTED MATERIALS TO BE READ BEFORE CLASS:
The resources below are intended to give the reader an introduction to the problem that presents them with some of the major issues of the debate without going into much detail about any specific issue.
Do: Ask students to think about and discus the following questions:
* For additional ideas on assignments and lesson plan you might develop with this material, visit our Suggestions for incorporating lessons ethics into your course page.