Unit 6: Executive Compensation 2
Wayne Guay, Adam Cobb, and Steve Novick
In American culture, social class is wrongly defined as a hierarchical structure
determined by wealth, income, power, behavior, prestige, heritage, and culture. Therefore, the
focus has shifted to socioeconomic variables such as occupation, education, and income.
According to sociologists, the United States has six social classes. The upper class earns $72,000
to $200,000, representing 3% of the population. There are many politicians and CEOs who make
more than $250,000 every year and are mainly from the upper classes. Lower-middle-class
incomes range from $20,000 to $40,000, while the lower class makes less than $20,000.
The Fair Labor Standards Act (FLSA) does not permit exempt employees to receive
overtime pay. Employers are required to pay a minimum wage and overtime for work beyond 40
hours per week. Unless they are part of an exception group. Paying overtime hours is up to the
employer. Non-exempt employees, however, are entitled to overtime pay, which is half the
regular rate. Low-income workers, such as those earning less than $13 per hour, are generally
exempt, while those managing more than two employees are not.
CEOs are among the highest-paid people in the world. Overpaying CEOs leads to
inequalities in organizations' pay structures and the economy. The high pay arises from weak
corporate governance and the inability of shareholders to hold corporate boards accountable. The
board of directors is primarily concerned with remaining employed, resulting in a lack of
concern for shareholders. A CEO may receive a golden parachute severance package upon
leaving an organization. The CEO will be protected from financial risk and job loss if a merger