Negative Effect of Earning Disparity

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Table of Contents

Introduction
Statistical Data
Fairness and Justice
Corporate Governance
Conclusion
References

Introduction

Wages in the modern world are one of the main areas of concern. This is due to the fact that in the United States, performers receive significantly bigger financial remuneration for their activities than other employees. Thus, it has caused much controversy regarding its excessiveness and instability. Especially in the USA, this issue causes significant dissatisfaction since the gap in this indicator between executives, and other personnel is more striking than in other countries. Therefore, in this essay, I will argue that this disparity raises problems that concern fairness and corporate governance, and there is no reason for executives to earn significantly more than their employees.

Statistical Data

There is a significant number of unsatisfactory statistics regarding the problem under study. It is noted that, for example, in India, senior top executives received 243 times more than employees in lower positions (Nandamuri & Chebolu, 2019). Further, in America, CEO compensation had grown by 807% or 937% by 2016, when the annual compensation of a typical worker was 11.2% (Nandamuri & Chebolu, 2019). Statistical information shows a significant disparity in this indicator of the work of individuals, which determines the need to study the negative contribution it has to the person and organization.

Fairness and Justice

The first issue of concern is the fact of injustice regarding the difference in the pay of employees of the organization. It is worth noting that wages should undoubtedly be paid relative to the position held by employees; however, a striking disparity that several hundred times has no justification (Malhotra et al., 2021). This is especially true of those organizations in which employees are underpaid, and they are struggling to cover personal expenses and needs when their bosses, earning an annual salary, allow them a more than luxurious lifestyle (Nandamuri & Chebolu, 2019). The circumstance creates a sense of injustice and inequality that results from workplace dissatisfaction. Moreover, that can evoke morale and damage society’s perceptions about this aspect of the work. In addition, specialists in higher positions often receive their pay through their own efforts alone, and talented people who work hard receive significantly less. This fact distorts the views of the younger generation, which sets goals to achieve high positions to satisfy their own desires without introducing changes into society.

Corporate Governance

The second reason why I believe that earnings disparity raises problems is the negative impact on corporate governance. Executives who earn much more than ordinary employees take more part in the decision-making process than the team members. Thus, they receive great benefits at the expense of the company and its shareholders. Such acts may result from neglect of duties and lead to illegal activities within the organization. In addition, the involvement negatively affects employees of lower rank. It is believed that the staff can be motivated by the resulting disparity in wages (Chi et al., 2019). At the same time, this striking gap cannot become a driving mechanism for many individuals but only demotivate them to perform tasks and initiate changes in the company.

Conclusion

In conclusion, this essay provided arguments that inflated executive payments have a negative impact on such aspects of the organization’s work as fairness and corporate governance. These aspects are reflected in the understanding of the motivation of many employees and the violation of official duties of personnel occupying more prestigious positions. Thus, it is necessary to pay close attention to this problem both at the local and government level in order to reduce its detrimental contribution to the development and economy of the United States.

References

Chi, W., Liao, H., Wang, L., Zhao, R., & Ye, Q. (2019). Incentives to move up: effects of pay gaps between levels on employee performance. Human Resource Management Journal, 29(2), 238–253. Web.

Malhotra, S., Shen, W., & Zhu, P. (2021). What is (s) he worth? Exploring mechanisms and boundary conditions of the relationship between CEO extraversion and pay. British Journal of Management, 32(2), 529-547. Web.

Nandamuri, P. P., & Chebolu, R. M. (2019). Executive compensation: the critique and the ideal. IUP Journal of Corporate Governance, 18(3), 33–48. Web.

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Negative Effect of Earning Disparity

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