What accounts for the salary difference between being an employee or a CEO?
A lot of people would say it’s attributed to the fact that a CEO worked harder to get where he or she is.
Others, would say perhaps, but it’s also because they had connections (family, friends, school), money, and/or opportunities otherwise not available to those who are on the lower rungs of society.
So what really accounts for that salary difference between an employee and a CEO?
Aside from the argument that success is what you make of it, not solely determined by how much you make in salary, here are a few of my thoughts:
1. WE HAVE TO CONSIDER THE COUNTRY
In the U.S., the big hoo-ha is all about how American CEOs make about 343 times more than their average worker. (Source) You’re screaming bloody murder at this point because how can that really be possible, especially if you look at a country like Japan?
In Japan, CEOs earn 1/6th of what American CEOs earn, and only 16X the pay of their average employee.
“It shows, too.
Japan’s corporate bigwigs might travel around in chauffeured cars and play golf on the company’s dime, but they don’t trot around in designer suits, shuttle between cities in private jets, or order up multimillion-dollar houses.
And the moment the company’s profits plunge, they often take one for the team.”
(Source and Source)
On this note, I’d also like to point out that it looks even worse than it is, because American minimum wage is pathetic.
In Canada it is on average $10 an hour, but in the U.S. it’s $7.25 as an average (source).
I am not entirely convinced that it should be raised to $20+ as the source is suggesting, but it should be at least $10 an hour, considering that health insurance is rarely offered at those low-level jobs.
In Canada, even if minimum wage is only $10 an hour, we don’t have to worry about avoiding the doctor because it’ll cost $100 just for a 10-minute consultation to tell you that you have the flu and aren’t dying, or $700 just to get a basic check up every year or so.
I definitely do not believe that minimum wage in Canada for instance, should be $20/hour (or double what it is today), because that just makes the problem worse everywhere else.
All the costs of basic goods and services will obviously rise by 100%, which means everything will become twice as expensive… and it just puts people back into the same positions that they were before, except now instead of $0.50 for a few potatoes, it’s $1.
What’s the answer to this?
I don’t have one, but it isn’t giving more money without considering why people whine about not making it on a $20,000 a year salary in a small town yet they all flash their $700 iPhones with a $70/month data and voice plan.
If you work at a minimum wage job, but the cost of living in let’s say Toronto or Vancouver is too rich for your income, then you should move to a lower cost of living city, earn the same amount, and be able to make your dollar go farther.
OR, like New Yorkers, accept that you WANT to live in such a cosmopolitan city no matter what it takes, and you are willing to take on another part-time job at night or on the weekends to compensate for that higher cost of living.
Either way, it’s your choice.
2. WE HAVE TO CONSIDER THE CULTURE
In Japan, as I understand it, they are less likely to feel entitled to anything. They see themselves as bees, working for the greater good of the hive. No one bee is more special than the other, and in Japan they have a saying about this: “The nail that sticks up, gets hammered down.”
This is both good and bad for obvious reasons — they don’t see themselves as special individual snowflakes, but they also don’t allow for anything but conformity to their strict social rules, which is one of the reasons why they say the Japanese are so repressed that they do the very oddest things possible (e.g. Japanese adult entertainment, which I am told is some of the freakiest in the world.)
(..although Japanese people for me, also make the most delicious food in the world.)
In contrast, Americans are (perhaps stereotypically) more likely to toot their own horn, talk up how much they’ve accomplished and generally feel very proud of what they have achieved in their lifetime.. and rightly so, if you consider the history of the American people.
They were all people who left Europe’s stifling cultures, and came to create a new melting pot culture based on hard work, persistence and general “get ‘er done no matter what” as an attitude. Some of these folks were so poor, they figured they had nothing to lose.
Others, just didn’t want to be part of the elitist culture of Europe where one was not very likely to make it to the top if they were born into poverty and didn’t have connections.
Again, this is both good and bad for obvious reasons – what I like the most about American culture is that anyone, anywhere, no matter your background or pedigree, can make it to the top. It is not based on who you are, what your last name is, or where you are from — it’s all you.
The bad, is clearly that some people feel like they’re more special than others, and that contributes to resentment on the part of others but also the inflating of an ego to the proportions of a blowfish.
3. WE HAVE TO CONSIDER ABILITIES AND INTELLIGENCE
This one is a touchy area because no one likes to think that they don’t have the intelligence to “make it”, and if I have learned anything working in corporations, some people who are at the top, don’t deserve to be there based on intelligence alone, and others at the bottom, should be at the top instead.
All that said, we ARE human beings with different talents and abilities and I am not of the belief that “everyone can do any job anywhere“.
That is just impossible and unrealistic.
With myself as an example, I have absolutely no brain or interest for science.
I just don’t get it, and more telling — I don’t care to understand it because I have no interest in it.
If all the jobs that were available with high pay were in things like chemistry or biology, I’d be utterly screwed and would probably be a McDonald’s flunky.
Our society tends to rewards the abilities that are more elusive and perhaps take more work to achieve such as in technical professions dealing with math, science and logic, rather than the arts for instance…. which is shown in the pay received in different jobs.
That is not to say that someone who is geared towards the arts is screwed for life in our society, but they have to be more creative and they have to work harder to achieve the same level of success as someone who is more naturally inclined towards math for instance.
Perhaps that artsy brain can be put to good use dreaming up of a brilliant idea, and then they are able to gather a team of more science-y types around them to execute it.
Or maybe they use their artsy brain towards applying it in a profession like becoming an architect or even in programming where they have to come up with creative ways to solve a problem.
Whatever it is, there is a basic understanding that not everyone is conventionally smart, but even if you aren’t smart, it also doesn’t mean you’re too stupid to achieve anything.
It just takes a little more finagling.
4. WE HAVE TO ACKNOWLEDGE THAT SOME PEOPLE START WITH GREAT ADVANTAGES AND OTHERS WITH NOTHING AT ALL
If you have money.. or rather if you were born into your parents’ money, you have a lot more opportunities than most.
You were probably encouraged to go to college, not required to work to help pay the family bills to put food on the table, allowed to concentrate more on schoolwork, given private lessons in areas you were struggling in, and/or part of a circle of society that had role models to show you what you could achieve (engineers, doctors, surgeons, executives, etc), so you never doubted that you’d end up where you were.
Others who don’t start at the same line as you did, may have started way in the back — quitting school at 16 to work 2 jobs to help your single mother feed your brothers and sisters, or having had no support your entire life in anything you wanted to achieve, let alone to be encouraged in the poor neighbourhood you were in, to think about going to college.
I am of the belief that the situation really does play a big role in where you end up, and it’s partly the luck of the birth lottery.
I’m always in awe (but not condoning) of those mafia bosses and crime lords that have such levels of instinctive intelligence to be able to gather those in their area around them as natural, born leaders, to execute their orders and run a tight pirate ship, so to speak.
If those criminals had been born into better families, maybe they would have ended up as CEOs on the right side of the law, rather than the wrong.
In contrast, I see rich kids who had everything given to them, basically waste their lives away, doing drugs and not bothering to make the most of what they were given.
So what does all of the above add up to in the difference between CEO and average employee salaries?
For one thing, it means that a realistic society is not an utopian, totally egalitarian one.
Some people make it to be a CEO for various reasons, and it isn’t JUST about hard work and persistence. They were also given the opportunity, born in the right place at the right time, to the right family, and more importantly into the right society or culture that gave them a leg up to reach that level of success.
Others, don’t ever make it, and it isn’t just because they’re lazy bums.
Don’t get me wrong, some of them are lazy bums who want to sit around all day and whine.
…but maybe they weren’t given the chance to finish high school, or the right home environment to not worry about feeding themselves and avoiding being recruited (unwillingly) into a gang or else risk being shot while walking home one day from school.
Maybe they had siblings they had to take care of, a rough, abusive home life or were just never encouraged to pursue anything because their immediate, human needs were too pressing to worry about investing so much time and money into achieving a degree to be able to make something of themselves.
IT IS ALL IN THE VALUE WE PLACE ON CEOS AND WORKERS BASED ON THE DIFFERENT TASKS THEY HAVE TO ACCOMPLISH
The second, is that it is simply easier to replace someone at the employee level than it is to replace a CEO or an executive who has been key to creating value in a company.
There is simply more supply available at that level.
A McDonald’s employee who makes minimum wage can be found in any high school or retired pool of candidates.
A CEO who has experience, has been trained in the corporate culture (perhaps working as a burger flipper him or herself when they were younger), and understands how to not only envision the future of the company and make it grow to achieve that vision by herding along the thousands of employees worldwide, is not someone you can pick out of any pool.
It is also the investors and the board of directors who approve these salary increases.
So if we don’t say anything, it continues being the way it is — CEOs get higher and higher salaries, while employee salaries continue to stagnate and it creates a wider and wider gap between the have and the have-nots.
Lastly, CEOs also have to take the blame for everything, and manage all sides of the puzzle — employees, investors worldwide, board of directors, internal company executives, etc.
Employees don’t have to take the blame for anything, and no one will remember if Jack Smith burned the fries and got fired. They’ll just hire another guy to take his place.
If the company tanks, they’re fired, ousted, pink-slipped (although maybe with a generous golden parachute). They may not be able to ever find a job again (not that it matters if they managed their money wisely), but their reputation is very public and perhaps tainted for life.
But the real difference perhaps, is the way we value CEOs and employees in any given society and country.
The fact that American CEOs make 343X more than their average worker, doesn’t necessarily mean that they work 343X faster, smarter or are 343X better than they are… it just means that to us, they’re valued at 343X more than the average employee.
If you don’t believe in this, then you need to either:
- lower their salaries to a more equitable pay
- raise the salaries of the minimum wage workers
- or vote with your money and refuse to continue to perpetuate the success of a company built on the backs of others either by not investing with them, or not buying their products and services