Prompt: "Some have argued that the salaries of corporate executives should be linked to those of their lowest-paid employees. This, they argue, will improve relations between management and workers, reducing costly labor disputes and increasing worker productivity. What these people overlook, however, is that these high salaries are necessary to attract the best managers, the individuals whose decisions have the greatest impact on the overall well-being of the company."

Assignment: Which do you find more compelling, the contention that worker and executive salaries should be linked, or the response to it? Support your position with reasons and examples from your own experience, observations, or reading.

RESPONSE

Some people believe that the salaries of corporate executives should be linked to those of their lowest paid employees as this will improve management's relations with the workers and hence business performance. While some others think that high salaries of corporate executives are essential to attract best talent to ensure sound business performance. This issue is contentious one. However, a closer examination reveals that the salaries of corporate executives should not be linked with those of the lowest paid employees for several reasons.

Firstly, Salaries should be commensurate with the role and responsibility of the employee in the organization. Corporate executives define the strategy of business and are responsible for overall performance of the business. For instance, in the recent failure of investment banking firm Citi Bank, the incumbent corporate executive owned the responsibility for poor performance of the bank and resigned. Now the onus of making Citi Bank profitable is completely on the new corporate executive Mr. Vikram Pandit. Therefore, clearly corporate executives have much greater responsibilities in comparison with those of lowest paid employees. Therefore, linking the salaries of corporate executives with those of lowest paid executives would be unfair.

Secondly, different expertise levels demand different salary. Corporate executives acquire the specialized skill-sets through hard toil. For instance, most of the corporate executives spend millions of dollars in earning their specialized degrees. Moreover, they spend number of years in honing the skill-sets. In comparison, lowest paid workers earn their skill-sets through vocational training. Thus, hard work and investment of corporate executives should be suitably rewarded and their salaries should not be constrained through linkage with salaries of lower paid workers.

Thirdly, prices of all services and products are governed by the fundamental principle of demand and supply. The number of expert corporate executives is very small as compared to the number of available positions. Such is not the case for lowest paid workers. Therefore, to attract the best talent, incentive of higher salary is required. Under such conditions, linking salary of corporate executives to those of lowest paid workers is not advisable.

Some people might argue that linking salaries of corporate executives with that of lowest paid workers shall improve relations between management and worker, reducing costly labor disputes and increasing worker productivity. However, salaries of all the employees should be linked to business performance which shall make them aligned with the business objective. It shall make even the lowest paid employee realize his importance in achievement of organization's goal and work productively. Moreover, an efficient corporate executive has skill sets which he can use to improve relations with workforce and make it more productive.

In sum, while there are many arguments to be made for both the sides, it is clear that salaries of corporate executives should be commensurate with their responsibility, skill-sets and availability. Hence, it would be unreasonable to link salaries of corporate executives with salaries of lowest paid employees in the organization.