Any defense of the extravagant compensation for corporate executives inevitably boils down to two points: first, it’s fair because it’s tied directly to increased profits and, second, because it provides necessary incentive for these highly talented people to share their excellence and make the often tough decisions necessary to keep their companies competitive.
In an era of “maximum shareholder value,” the corporate point of view — widespread, though rarely expressed publicly — is that wages with prevailing market wages are all that employees need as an incentive, and all the compensation they deserve.
What’s curious, however, is how infrequently the same logic is used when talking about the pay of frontline employees who actually produce the goods and services sold by their companies.
No surprise then that after decades of soaring profits and stagnant wages, American business faces declining employee engagement, loyalty and productivity growth and declining workforce participation.
What’s needed is a new business norm that says all workers should share in the success of their companies, with government playing a supporting role, nudging things in the right direction.