CEOs Make 351 Times More than a Typical Worker
A study by the Economic Policy Institute estimates that CEO compensation has grown 1,322% since 1978, while typical worker compensation has risen just 18%. In 2020, CEOs of the top 350 firms in the U.S. made $24.2 million, on average — 351 times more than a typical worker.
Today's blog was written by Charlie Fletcher, who tackles many aspects of the income inequality issue. Charlie says that one of the primary duties of any business is to operate fairly and ethically. Unfortunately, too many companies today consider this to be contrary to other priorities; specifically, making a profit. Yet, it’s important to understand how a high standard of ethics in your company can positively impact your community, and your business’s bottom line as well.
Among the biggest aspects of business ethics being discussed now is income equality. Steve Mintz, aka The Ethics Sage, has, for some time, pointed out that there has been, as The Ethics Sage notes, wage disparities based on gender, race, sexuality, and socioeconomic background. Following COVID-19, many low-paid workers have come to recognize that their employers’ approach to compensation is, at best, unfair, and at worst, outright exploitative.
To avoid this, it’s essential to take a closer look at income equality. What does it mean and how can you adopt it as part of making your workplace a fair and ethical environment?
Understand the Definition of Equality
At its most basic level, income equality is linked to the elements considered under the Equal Pay Act. This legislation dictates that pay discrimination based on gender in any workplace is prohibited. Specifically, it requires people performing the same jobs (based on the content of the position) to receive equitable pay, including benefits.
However, the problems of income inequality aren’t usually around following the letter of the law, but the spirit of it. To create a truly fair and ethical workplace, business owners need to go beyond what is required of them by legislation.
True income equality requires you to look at how deeper societal biases tend to impact decision-making within your company. It’s likely that your company may be implicitly giving less income to marginalized groups as The Ethics Sage points out. However, the statistics show us inequality in these demographics is nonetheless present.
When we talk about making income equality among your workers it is not just making certain the numbers are level. It’s about making sure everyone has equal opportunities to reach higher-earning positions. It’s about considering pay rises beyond inflation levels so all workers have access to a good quality of life. Remember; fairness doesn’t mean everyone’s the same, it’s about working to ensure innate differences aren’t setbacks in the workplace.
Income equality must begin with a fundamental shift in leadership attitude. After all, achieving the ethical standards of a business are important to entry-level workers. Executives need to embrace the fact they have key responsibilities for treating their workers equally and maintaining a fair working environment. This includes rethinking their approach to how fair worker pay fits into the goals of the business.
It can be helpful in some instances to introduce new leadership to influence executive thinking. Since creating and maintaining income equality has some distinct financial challenges, it may be more appropriate to seek a CFO with proven high ethical standards and experiences. While in the past the role of a CFO was largely oriented around operations and the budget, it is becoming increasingly necessary for professionals in this area to have skills in multi-level communications and creating strategies to achieve a company’s financial and ethical goals. Targeting candidates with experience in pay equality can be a vital tool in systematically ensuring that your leaders in your company are compensating employees fairly.
In addition to introducing new leadership, executives will need to consider closing the gap between the average pay for workers and for top executives. Unfortunately, most leaders enhance their pay packages by implementing excessive bonus structures and pay packages for themselves and refuse to bring employees’ pay up to fair standards. This has served to create a growing and unethical wealth disparity. You only need to look at the example of Gravity Payments CEO Dan Price to see that when executives forgo ludicrous paydays in favor of fair wealth distribution among staff, everyone stands to benefit.
Optimize for Equality
Not every business will be immediately well placed to adopt income equality among workers. A lot of companies have worked within social structures developed over decades to prioritize profit rather than ethics. As such, you will have to take time to review your business and find ways to optimize your operations that will maintain income equality.
One important area of optimization is finding ways to practically afford the new rates you pay your workers. It’s worth considering how measures like remote work can help your company save money that will enable your company to provide more fair resources for your employees as a result. Many businesses have found opting for remote work to be more sustainable by reducing the use of commercial resources, fuel consumption, and in-office electricity supplies.
Alongside finding ways to pay for wage and benefit increases, you also need to optimize your business to embrace transparency, according to The Ethics Sage. Inequality blooms in cultures of secrecy around who is being paid what. Make it a point to standardize your pay structures and make sure everyone is well-informed about what salary is standard for each role and level of the company. Avoid creating rules forbidding discussing salaries and be open about what bonuses your executives are receiving.
Income inequality is an issue plaguing our business landscape. As a company leader, you have an ethical duty to make sure this is analyzed and needed changes made to close the income gap and send a signal to employees that they are valued by the company and will be treated fairly with respect to their compensation. It’s important to reward work to build the trust between employees and employers.
You can contact Charlie Fletcher, the author of this blog, at [email protected].
Blog posted by Dr. Steven Mintz, The Ethics Sage, on October 28, 2021. Steve is the author of Beyond Happiness and Meaning: Transforming Your Life Through Ethical Behavior. You can sign up for his newsletter and learn more about his activities at: https://www.stevenmintzethics.com/. Follow him on Facebook at: https://www.facebook.com/StevenMintzEthics and on Twitter at: https://twitter.com/ethicssage.