If you are a Walmart employee who makes $12.67 an hour, it will take you about 785 years to earn the CEO’s $20.7 million salary, according to the Huffington Post. Furthermore, this estimate only assumes that you don’t take vacation days or pay taxes.
This mind-blowing calculation truly puts the CEO-to-worker pay ratio into perspective: Are CEOs overvalued?
Michael Duke, Walmart’s chief executive officer, received a 14 percent pay raise; he made $18.1 million in the previous year. Because of the new Dodd-Frank law implemented in 2010, shareholders of a company are now able to vote on a CEO’s proposed pay package. Economists call it the “say on pay” policy, according to the New York Times.
However, overpaid chief executives aren’t fazed:. Stockholders wind up approving the suggested salaries 97 percent of the time.
The problem here is that CEOs are often rewarded, but not reprimanded, for their poor performance on the job. Chief executive officers may break more of a sweat in boosting profit if they acknowledge their salary (or position) is in jeopardy.
JCPenney, for example, thought they struck gold when they hired the former CEO of Apple, Ron Johnson, for their company. They paid him the usual outlandish CEO salary expecting revenue revival under Johnson’s leadership. Unfortunately, Johnson drove JCPenney over a cliff and lost $500 million in 18 months.
This is not to say that all CEO’s are overrated. Steve Jobs, the deceased magnate of Apple, well-represented the value of his massive salary. He demonstrated his worth and significance to Apple when he yanked the company out of bankruptcy and molded it into one of the most profitable corporations ever.
CEO’s have long argued for the advantages of making millions a year. Most of them ensure us that such strong financial incentives for the chief executive officers will help drive the company to the top. But should their pay seriously be hundreds of times the salary of the average worker?
Some argue that CEOs shouldn’t be paid less, but they need to apply more effort into their work. Over the last three decades, the CEO’s salary increased 127 times faster than the average worker’s pay. But has the job increased that much in workload?
Do you think the salaries of chief executive officers are justified?