Business Administration Assignment: CEO Salary Ethics Analysis

This assignment analyzes the ethical implications of the substantial salary differences between CEOs and other employees within a company. The student's response highlights the negative impact these disparities can have on employee morale, loyalty, and overall performance. The solution references key concepts such as pay fairness, hierarchy-based reward systems, and the detrimental effects of large salary gaps on employee satisfaction and retention. The assignment emphasizes that prioritizing employee well-being and reducing pay gaps can lead to increased productivity, loyalty, and ultimately, better business outcomes. The student argues that the focus should shift from hierarchical structures to recognizing and rewarding the contributions of all employees, thereby fostering a more ethical and productive work environment. The solution also highlights the importance of ethical considerations surrounding CEO compensation, advocating for a fairer distribution of rewards based on the amount of work performed, rather than solely on hierarchical position.

Running head: Business Administration
Business Administration
Name of the Student
Name of the University
Author Note

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Answer 1. Due to an immense gap between the salaries of a CEO and the other
employees of a company, the morale of the employees tend to suffer, there is a sense of decline
in loyalty which leads to poor execution and strategies in companies (Mackey, 2009). It is not
ethical for CEOs to be paid so much more than other employees of an organization. The large
gap in salaries really tends to affect employees and a smaller gap in their salaries with their
CEOs would lead to solidarity and better performance right through the workplace.
Answer 2. This practice does not use a valid reward distribution system. Instead, it is
based on the system of hierarchy (Gabaix, 2016). The higher the person is, in terms of hierarchy,
the greater is his salary. The argument that market forces has contributed to the rise in salaries of
CEOs does not hold true. Based on a five-day week, a CEO makes more money in one day than
what other employees make in a month. This is a little unjustified and riles other employees who
work twice as hard as the CEO.
Answer 3: Companies should be considering ways to reduce the gap to improve the
overall morale of the employees because the rising gap between the salaries of CEOs with the
salaries of their subordinates and other members of the organization tends to have a detrimental
effect on the morale of the CEOs. Employees tend to care about pay fairness and it does hurt
their morale when there is a yawning gap between their salaries and the salaries of their
CEOs . ,Employee retention and satisfaction of employees are the main performance indicators
for the success of a business (Means, 2017). It is more economical to retain employees and invest
in the morale of an employee. One should try to improve the morale of employees because that
leads to increase in productivity, job satisfaction and an increase level of loyalty which in turn
has a positive effect on one’s business. One should keep one’s employees happy because that is
crucial to the success of a company. When an employee knows that he or she has a support

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system, they tend to work better which in turn leads to better productivity and leads to the growth
of a company.
Answer 4: CEO and upper management salaries are not subject to ethical considerations
because a CEO is paid astronomical amounts compared to the actual work that a CEO does.
Other employees and subordinates of CEOs do most of the work in a company and they are paid
a fraction of what a CEO is paid even though the employees work tirelessly for long hours and
have a plethora of job responsibilities (Means, 2017). This is unethical. A person ought to be
paid not based on hierarchy and the position that one occupies in an organization but it should be
based on the amount of work that a person does. Only then will the rumblings of discontentment
among employees cease. Thus it is important that organizations reduce the gap in salaries
between the CEO of an organization and the other equally important employees of an
organization so that it boosts their morale, they are happy and they are able to deliver better.

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REFERENCES:
Gabaix, X. (2016). Power laws in economics: An introduction. Journal of Economic
Perspectives, 30(1), 185-206.
Mackey, J. (2009). Why Sky High CEO Pay is Bad Business. Harvard Business Review.
Means, G. (2017). The modern corporation and private property. Routledge.
Shue, K., & Townsend, R. R. (2017). Growth through rigidity: An explanation for the rise in
CEO pay. Journal of Financial Economics, 123(1), 1-21.