Mind the gap!
HR has to start considering the gap: the wage disparity gap, that is. What should HR do about income disparity in organizations?
These numbers represent the state of wage disparity in Canada: the average Canadian worker earns $49,000 per year and the average salary for a CEO in Canada is $7.8 million. A CEO earns 159 times the wage of the average worker, but it is much worse in the United States where the average CEO’s salary is over 300 times that of the average worker.
The issue of excessive executive pay is at the heart of an organization compensation management system and may be causing organizational and social problems. According to the Organization for Economic Cooperation and Development (OECD), “Income inequality in OECD countries is at its highest level for the past half century.” And, “The average income of the richest 10% of the population is about nine times that of the poorest 10% across the OECD, up from seven times 25 years ago.”
Prime Minister Justine Trudeau believes that it is this income inequality that is a leading factor in the political populism that is spreading throughout the world. It is a complicated global issue that has many social, economic and political causes, but one must recognize that income inequality is a factor.
Some politicians such as UK Labour leader Jeremy Corbyn believes the government should address this issue of excessive executive pay and “suggested a wage cap which would prevent people from earning “ridiculous” amounts.”
In the United States, soon all publicly traded companies will have to disclose worker to CEO pay ratios. Currently, regulations in Canada do not require this disclosure. Should Canada follow the United States and make CEO-worker wage ratios public information? How would this affect an organization’s compensation system? It is definitely something HR needs to think about.
- Discuss the benefits and the negatives with forced disclosure of CEO-worker pay ratios.
- Research to determine if there are any benefits for an organization’s compensation system to be disclosed to all workers in the organizations?