According to an article in the Independent top bosses are now earning 143 times what workers’ get paid. This, says the article, has tripled over the past 15 years. That is a seriously huge gap in earnings. And remember, this is an average. There are obviously a bunch of CEOs getting more than this.
Why is this happening? Because they can. It’s that straight forward.
Here are some underlying reasons. Bound to be more of course.
Shareholder’s greed for profits. ?
Provided the CEO can deliver on huge returns to its shareholders, they don’t care about the inequalities of pay rates. Of course some shareholders themselves are at the mercy of their own shareholders in having to deliver high returns. After all most investors in companies or stocks are institutions themselves. These are pension providers, municipalities, hedge funds, investments companies such as Soros Fund Management or Warren Buffet’s Berkshire Hathaway company. And they have a gun at their head to deliver high returns to their shareholders.
A misconception that high salaries retain good staff
Many research papers have pointed out that high salaries is not the most important factor in employee retention. In fact most surveys point out that ‘making a difference’ is the prime motivator for employees.
In fact a recent article in Forbes has pointed out that employee’s who stay in companies longer than two years are making less on average every year than those staff members who move around more. This puts paid to the theory that high salaries retain good staff. You can earn more by jumping around.
No action by employees to change the status quo
There is overall no concerted action by the low paid employees to actually change that status quo. The main reason for this is probably fear that they will end up getting fired if they complain. Not only could they lose their jobs but could find it near impossible to actually get another one.
Of course one problem is that an employee with low level skills is easily replaced with hundreds waiting at the door to submit their CVs. One need only to see the queues outside factories or standing in line at employment offices. These are people who have limited skills or skills that are outdated. If you have a job, you are not going to want to jeopardise your position by complaining about how high the upper level salaries are.
An Old Boys Club
It’s not what you know but who you know. It’s an Old Boys club that runs the show. This is true whether in politics or in business. A high percentage of CEOs will have come from wealthy families, and/or will have worked their way through the elite schools and universities.
Of course there are entrepreneurs that have managed to found their own empires without help from family wealth or powerful educational institutions. Thinking Steve Jobs and Apple, or Bill Gates and Microsoft. But have a look at the big banks, investments institutions, big professional firms and see who is running these. Old names, old money, big connections.
As lowly employee it is almost impossible to rise above the rank and file. And this Old Boys Club is in fact another reason why women knock at that proverbial glass ceiling. They just don’t have the in into those Old Boys Clubs to easily allow them into the top management levels.
Does this mean that nothing will change? Probably not in the near future. Unless the workers can get some form of powerful base together to make a collective noise, nothing will change. The trade unions have certainly lost their bite and their ability to make a difference. Mainly one supposes because trades themselves are no longer required manufacturing having been pushed into developing countries where there are no trade unions.
Perhaps middle management unions need to be founded, sales or marketing unions, tech support unions or banking and investment staff unions just to note a few. Or just a general union of workers reporting to CEOs could do it.
Whatever solution can be found to address this disparity in salaries should be found soon before this gets out of hand. Or more so. One thing is certain. CEO’s will continue to pay themselves as much as they can get away with. It’s the nature of the beast.