Executive compensation strategies at Whole Foods and Apple

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Compensation strategies for two companies

Whole Foods

Whole Foods, the organic grocery retailer, is one of the few companies that has actually reported garnering positive press as a result of its executive compensation policy. Whole Foods ' "caps the chief executive's salary and bonus at 14 times the average worker's pay" (Clark 2006). This is intended to reinforce the team-based leadership and performance reviews that structure the company's leadership within its stores throughout the nation. However, it has been noted that Whole Foods is not quite as democratic in reality as its written policy might suggest. CEO John Mackey made $1.8 million exercising his stock options, far more than his official salary of $436,000 (Clark 2006). However, his overall compensation is still relatively low, compared to other CEOs of his caliber.

Second Part: Ethical issues in compensation management

Overall, in America the discrepancy between the salaries of the very richest and very poorest is growing. Large CEO salaries are often seen as symbolic of this fact: "while many workers are facing salary cuts, the average compensation for CEOs increased by 6% from 2011" (LaBossiere 2012). Defenders of large CEO salaries point out the tremendous stresses and demands of the job: for a company to flourish, it is essential to attract the best and brightest. However, research also indicates that "the propensity to leave [by subordinates] is greater if their company CEO is paid by a larger percentage than subordinates are" (U.S. CEO compensation: Abuse or reward, 2012, Accounting Web).

The Fair Labor Standards Act (FLSA) "prescribes standards for the basic minimum wage and overtime pay, affects most private and public employment" (FLSA, 2012). There is no maximum salary cap relative to the amount of money earned by average workers. The existence of a minimum wage underlines the importance of government interference in the marketplace to some degree. However, just as a lack of price controls on wages can have negative effects when wages are pushed to trend downward by market forces, having exceedingly large CEO compensation can create social and economic injustices for workers that have just as much of a negative impact upon the working and middle-classes over time as a low minimum wage.