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Overcoming The Demoralizing Effects Of Executive Pay

Overcoming The Demoralizing Effects Of Executive Pay

In a climate of global economic uncertainty, the socioeconomic gap is continuing to widen, as the middle class slowly disappears into either the impoverished or the wealthy. This raises the issue of executive compensation, and the perception that it is out of line with business performance, especially compared to the average worker’s salary. Besides looking at facts and figures, it is clear that the public, as well as employees of these executives, do not fully understand how the salaries are delegated, especially in the aftermath of the global financial crisis.

It seems that the core of this problem stems from a lack of understanding of the key drivers that make up executive compensation, which leads to an air of mistrust amongst employees and the public. Because of this, employees may find it difficult to increase their performance levels since their own compensation carries questions of inequality. Of course there are valuable reasons why executives receive higher paychecks, but if the employees and the public cannot understand the justifications behind the rationale, frustration and wariness follow.

Businesses already understand the importance of improving their communication with the public, made even easier these days with ubiquitous social media tools. However, internal employee communications are just as, if not more important. Yet it seems these inter-company forms of correspondence have taken a backseat exacerbating the misconceptions of compensation.

Internal private social networks must play an important role in educating employees about the broader picture. Ideally, employees should be continually receiving ongoing information so that the driving reasons behind executive decisions are understood before announcements are made public.

Another key strategy in confronting false perceptions is the building of relationships between executives and employees. By regularly engaging staff members, CEOs and senior executives can reaffirm the company’s mission and business goals, thereby creating a greater sense of community. When employees are abreast of business strategy, policy, economics etc. the less likely they are to feel disgruntled, and the more likely they are to defend and promote the decisions of the business.

*Image creditd to Getty Images. YD2VEZSMDPQ4

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