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Executive Salaries And Employee Relationships

Moves afoot to curb CEO salaries. Steps by shareholders and the SEC affect pay, stock options, and 'golden parachutes.' [Christian Science Monitor | Top Stories]

Disclaimer: I might be a little bias in commenting on this story, most of my peers, clients, and friends are senior executives -- many of them earn every penny of compensation at least twice over, they deserve what they earn.

The above article notes executive salaries are 282 times the average workers pay. While that might seem excessive, most people would agree the average executive has at least 282 times the responsibility and investment in the company they serve.

In perspective, more responsibility means more income. However, often employees who are feeling the burden of their own financial stresses become frustrated and often rebellious against the income of higher ups. How would you feel if you learned your peer made 50% more for the same work? Employees get this from 3 sides.

But how are we judging salary, employees are responsible to the customers; but executives are responsible to employees, shareholders, partners, and customers.

There are some things you can do to improve employee relationships in regards to salary:

  1. Make executive salary risk based. Provide executives a base salary 25 to 100 times that of the average non-managerial salary, depending on your industry. Additional compensation should be based on performance measures and include stock compensation. It is an executives responsibility to live within their means.
  2. Establish pay guidelines or common scale. Make it clear how employees are paid, what merits pay increases, and what qualifications does an individual need to fit a certain pay scale. Use factors such as education, objectives met, and past performance -- never give raises for factors that don't contribute to the bottom line.
  3. Discourage discussions of salary. When employees talk among themselves about salary discord is often the only result. Ask employees not to speak about their salaries to other employees, and to keep salary information they become aware of private. No one needs to know what you are paid but yourself.
  4. Offer everyone multiple forms of compensation. The same compensation received by executives should be available to employee, but only smaller. Lavish benefits at the executive level often causes employees to become discouraged. Demonstrate employees can get big perks for great contributions.
  5. Put a dollar value on non financial benefits. Let employees know about those non tangible benefits they receive for working with your organization. Highlight social events, and other things provided by the company. Often these areas are overlooked by employees upset with individual wages.
  6. Address salary concerns quickly. Don't let the cinders of wage concerns burn in your company. Address these issues quickly by at least discussion them with the individuals concerned. Never give them a raise because they complained, but tell them exactly what they must do to earn more.
  7. Practice fair wages across sex, race, and ability. Actual pay should be based more on job category, experience, and ability than any other individual characteristics. Individuals with similar job roles should be paid similar salaries. Problems in this area can lead to serious legal challenges.
  8. Limit salary information to accounting only. Managers can function without knowing exactly how much each employee makes. Provide managers total salary numbers for budgeting, and encourage them to use percentages for annual raises. Scoring systems help make this fair while keeping a project on budget.

/ employee-relations | relationship-realms /

By Justin Hitt at July 7, 2003 7:31 PM  Subscribe in a reader


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