Are hefty CEO salaries justified?

On top of large salaries, extra demands made by top management include golf memberships, paid exotic vacations and retirement packages. FILE 

By EDWARD OMETE

In Summary

• Shareholders and workers often tend to overlook key things like time put into a venture or level of talent.

Popular sentiment amongst employees and investors around the world is that there tends to be “too much corporate greed” at the top.

It is a fact that management level staff and CEOs often earn several times what the average worker earns.

In one corporate example, the CEO earned up to 80 times what the least-earning employee took home, nothing abnormal in the modern day capitalistic business world where extra benefits, bonuses and exit packages are meant to motivate decision makers to perform and attract top talent.

But to the common man and low cadre employees, it sounds ludicrous that a few people should earn such a big proportion of a firm’s wage bill.

In addition to the salaries, extra demands made by top management are sometimes almost baffling both in the figures involved and the packages themselves.

I often wondered why memberships to golf clubs, paid exotic vacations, juicy retirement packages and share allocation are some of the benefits offered to retain or lure executives. Do they deserve all these?

Often, comparisons in wages appear not to make sense to low level staff whose hours are longer and perhaps whose work is even more tiring. As one employee quipped, “All they do is sit in meetings and write emails”.

But shareholders and employees often tend to overlook key considerations. For instance for founder CEOs, a lot of time and passion has been put into an enterprise. Often this involves years of hard work and self-sacrifice in lean times.

Investors and employees who come on board after a firm’s success may not have experienced such moments and this is perhaps why they have a distorted view.

As an entrepreneur at some point down the road when my startup does succeed, my shareholders should not begrudge these to me. On the other side of the arguments there are some truly remarkable managers who turn around dwindling fortunes of otherwise doomed corporations. How much should you pay for such talent?

The important question I guess should be whether the person or team delivers its set targets. If they do then whatever means are available should be used to retain them and keep them happy.