Personnel economics assignment week 5
Assignment executive pay:
a. What is the growth rate of the salaries of the CEO’s of large public corporations between 1980 and 2004 according to Pittinsky and DiPrete? What is the growth rate of the compensation of executives in the 30 year period prior ...
Assignments Lecture 5 on Personnel Economics 2016-2017
Cijfer/Grade: 6
Assignment executive pay:
a. What is the growth rate of the salaries of the CEO’s of large public corporations
between 1980 and 2004 according to Pittinsky and DiPrete? What is the growth rate
of the compensation of executives in the 30 year period prior to the mid-1970’s? How
developed CEO salaries according to van Veen and Wittek? Has this changed in
recent years? What does it do to work morale (Cornelißen, Himmler and Koenig)?
In recent years the salaries of the CEO’s have increased enormously in comparison to the
other wages of the employees. According to Pittinsky & DiPrete (2013) between 1980 and
2004, the adjusted average compensation of a CEO at a large public corporation in the United
States rose from $625,000 to $9,840,000. Which was a growth rate of 12.2%. In contrast to
this Pittinsky & DiPrete (2013) stated that during the 30-year period prior to the mid-1970s,
median executive compensation is thought to have generally remained flat.
In addition to what Pittinsky & DiPrete (2013) had mentioned, Veen & Wittek (2015) also
state that since the beginning of the 1980s, CEO compensation levels have risen dramatically
in both absolute and relative numbers. Veen & Wittek (2015) also mentioned that the CEO
compensation levels were quite stable in the period 1940–1970 and after that, they quickly
started to rise, and they have continued to do so until today.
According to Cornelißen et al., (2011) excessively high paid executives have a negative
impact on work morale. Individuals compare their effort-to-pay-ratio to that of others and
adjust it whenever they differ and this might lead to workers to decrease their own efforts.
(Cornelißen et al., 2011). Perceiving the CEO compensation as unfair has consequences for
the employees. For instance, Cornelißen et al., (2011) stated that it results in 20% higher
levels of absenteeism. It also has negative effects on well-being. According to Cornelißen et
al., (2011) higher income of a reference group affects subjective well-being negatively.
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