The Drive to Achieve and Executive Pay

As far back as 1993, federal securities regulators forced companies for the first time to reveal details about the pay and perks of their top executives. The reasoning was that once pay was out in the open, boards would be more cautious about outrageous salaries and benefits.

They were trying to stop the tide of rising executive compensations. In 1976 the average CEO was paid 36 times as much as the average worker. By 1993, the average CEO was paid 131 times as much.

Fast forward to today and the average CEO makes about 369 times as much as the average worker. This is three times as much as before regulators decided that executive compensation had to be public.

What happened? Their decision to make salaries public, thinking it would stop the steep rise in executive salaries, backfired.Instead of stopping them, it caused even more increases.

Apparently we are competitive beasts, and the drive to make more than our peers motivates us to seek higher salaries and thus more prestige. Knowing what someone else is making, spurs us on to seek more.

The drive to achieve status relative to other members of our tribe is one of the strongest and most basic of our internal motivators.

Failure to recognize the drivers of behaviors is a major cause of bad decisions. The Federal regulators failed to stem the tied of rising executive pay by making it public.

When we look at the factors that make us happy, we often say “it’s not the money.”

The link between amount of salary and happiness is not as strong as one would expect it to be. In fact, it is rather weak. Studies find that the countries where they have the highest ratings of perceived happiness are not those with the highest personal income.

I don’t know, but I sometimes think about these things, do you? What’s your take on this?

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