A Gap Too Wide

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Should the CEO be paid so much more than the junior clerk or customer service executive?
A big 
no as far as the Malaysian Trades Union Congress (MTUC) is concerned.
Last week, MTUC secretary-general Kamarul Baharin called for an audit of government-linked companies (GLCs) and government-linked investment companies (GLICs) where a significant wage disparity exists between the CEO and lower-level employees.
The same disparity exists in publicly listed as well as private companies, not just in Malaysia but all over the world.
A 2023 study by the Economic Policy Institute, a US think tank, revealed that the disparity had widened from just 21 to one in 1965 to 344 to one in 2022.
That is a huge gain for CEOs, to say the least.
The irony is, according to another study, most of the CEOs don’t deserve their humongous pay cheques.
According to another study, by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), a federation of US trade unions, the widest gap between the pay packets of the CEO and lower level staff is in NU Skin Enterprises, Inc, a multi-level personal care products company.
For every dollar the low level worker earns, the CEO takes home US$10,377.
In Malaysia similar gaps have been observed. Even after taking a 30% pay cut, Genting Bhd chairman and CEO Lim Kok Thay still took home RM74.81 million in salary and bonuses in 2020.
The average croupier in its casino earns about RM2,250 a month or RM27,000 per year. Add the three or four months bonus, it comes up to RM36,000 for a ratio of 2,078 to one in pay disparity at the gaming corporation.
Another study, also by the Economic Policy Institute, concluded that in most companies, corporate boards offer their CEO such huge compensations not because of their skills.
Mostly, they just succumb to the huge bargaining power that CEOs seem to have.
Of course the CEO has to show that he can add value to the company’s bottom line.
For most CEOs, particularly those in the Fortune 500 list, the size of their pay packet grows or shrinks with the financial performance of the company.
For instance, Penang-born Tan Eng Hock has outpaced the likes of Apple CEO Tim Cook and Tesla head honcho Elon Musk in terms of compensation.
Tan earned US$162 million (RM760 million) last year as CEO of Broadcom Inc. In the same year, Cook took home a 
measly US$63.2 million.
But Tan’s huge paycheque was premised upon his company achieving a certain level of profitability and gain in share price.
Broadcom, a semi-conductor company, saw its share price rise 106% over a 12-month period, bringing its market capitalisation to US$655 billion (RM3 trillion).
Kamarul also complained that at an average of US$1.07 (RM4.75) per hour, the minimum wage is no longer enough to cover even basic needs such as housing, food and healthcare and this has had a negative impact on employees’ happiness and well-being.
The real issue here, therefore, is not so much the wage disparity.
We just need to ensure that the average person gets paid a bit more for what he toils over so he can have an acceptable standard of living with enough left over for a rainy day and perhaps a little luxury.
Some have argued that the CEO’s salary should be reduced to a more 
reasonable level.
But what is 
reasonable is subjective given the high expectations placed on him.
In Malaysia, the payroll at the average company accounts for 15% to 30% of its revenue, compared with more than 40% in many companies in the western hemisphere.
This may account for the huge pay gap between the CEO and the sales executive.
On record, the average pay gap between the two sides is still the widest among US companies.
Data from 2018 compiled by Statista shows that the American CEO made an average of 265 times more than the lower level employee back then.
Rounding up the top five are India at 229 times, the UK at 201, South Africa at 180 and the Netherlands at 171.
At 127 times to one, China rounds up the top 10.  - FMT
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.

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