Ethical governance of executive compensation
Excessive levels of executive pay are headline news and have become a focal point of public scrutiny and academic debate. The wide – and increasing – ratio between executives’ and workers’ pay raises questions about corporate ethics, fairness, and societal impact. Yet executive pay decision-makers report on significant challenges in translating ethical principles into practice and perceived unfairness in executive rewards persists. Dr Sue Shortland reports on recent research.
In their academic paper “Bridging Theory and Practice: Ethical Governance of Executive Compensation in the Financial Times Stock Exchange 100”*, published earlier this year Perkins and Shortland report that the Chief Executive Officer (CEO)-to-worker pay ratio stood at 324:1 among Standard and Poor’s 500 companies in 2022, up from 61:1 in 1989. Not only is the differential considered to be egregious but it continues to increase.Media headlines regularly identify not only examples of excessive executive pay but place these in the context of poorly performing businesses. This underscores the need to examine ethical and moral dimensions of executive compensation governance.
Ethical versus moral considerations
Ethical considerations typically refer to externally defined standards of right and wrong conduct. These are often codified in rules or principles and include transparency, accountability and compliance.
…Read the rest of this article here on our sister website Relocate Global
