HR310 Unit 6

Unit 6: Executive Compensation 1 Unit 6: Executive Compensation Herzing University HR 310: Compensation and Benefits Professor Kermelle Hensley 10/15/2023 Title of Article: CEO Pay: Can a Tax Address Income Inequality?
Unit 6: Executive Compensation 2 Author: Wayne Guay, Adam Cobb, and Steve Novick Date Published: 12/13/2016 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
Unit 6: Executive Compensation 3 occurs. Considering that the CEO is the only employee who receives a golden parachute in a corporation, the golden parachute should be given to all employees. Article Issues: The rising economic inequality in the US, according to Portland city commissioner Steve Novick, can be attributed to the income hierarchy, particularly among CEOs. Professor Wayne Guay, a Wharton accounting professor, refused to acknowledge that CEOs bear considerable responsibility, especially since they earn 100 times the wages of the lowest-paid workers. To solve the issue, Guay recommends increasing the income of all representatives instead of focusing on a single area. In contrast, Adam Cobb opposes salary increases because he believes they encourage outsourcing jobs overseas. Regulations that require companies to disclose compensation packages continue to affect companies. Shareholder activism has been sparked by CEO issues. Impact of the Article: The Portland commissioner intends to charge corporations with a severe pay ratio, a tax surcharge to balance America's pay scales. Because of this, corporate executives will earn less while workers make more. Labor and social justice groups have expressed excitement about this proposal. Fresh investments may be reduced in Portland as after-tax profits may decrease. A few hundred thousand dollars would be charged to about 500 companies. Despite not focusing on CEOs, evidence suggests they are overpaid compared to other workers. It is sometimes necessary for larger organizations to hire people who can make risky decisions, thus justifying high salaries. As a result of reading the article, I have learned that taxation can be used to reduce inequality in America.
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