How would a cap impact workers and what does that mean for companies? Does this come from an embedded culture of tall poppy syndrome where those looking at others succeeding want to chop them down? The root of which being jealousy, a rather green eyed, unfriendly monster.

On the other hand, does it promote fairness and stop wage gap inequality?

Here are some of the reasons why capping CEO salary could be beneficial:

1. Capital can be used to re-invest in the company – all companies need working capital as they grow and to establish themselves within the market. Having additional working capital to invest in team, resources, tech, software can make a business operate in a healthy way and add greater value to their clients. It can also bring peace of mind to the company if the additional capital is used to create a strong reserves account
2. Reduce income inequality – by capping the higher-level salaries, it could mean the lower levels of job role can be paid more. This reduces inequality and increases a sense of fairness within the company. Potentially leading to a more motivated work force at the lower income levels as they perceive the company to be operating fairly and in their best interests
3. Long term sustainability – as your company grows, knowing that there reaches a point where the CEO salary gets capped allows you to re-invest and operate leaner. It also keeps the level of work expected in line with pay levels. As someone who employs others, the idea of a wage cap for CEO’s could be a good thing as my company grows. It would keep my bottom line set while making me more profit

However, is that fair? When the company is growing on the hard work of my entire team, should they not all benefit as the company grows? The challenge you have with this is the concept of fair exchange. Are they earning more than they are contributing in terms of time and effort and skill set?

Here are some of the key arguments against the CEO pay cap:

1. Attracting high quality talent – often the top talent know what they are worth. This drives CEO salaries up and often globally. Paying a higher wage to the CEO level can ensure you attract and keep the right talent in a vital role. This is often driven by the labour market and what roles are available
2. Performance incentives – pay is a major motivator for people. Especially when we have a cost-of-living crisis that many people at all income levels are feeling the pinch. As your team grows and the CEO’s job increases in scope as the team grows, it would make sense to compensate them increasingly as their remit increases
3. Freedom of choice – should companies be governed internally with regulatory influence or should they be able to set their own culture, pay culture and compensation schemes? I lean to the side of freedom of choice as I believe there are different stages within a business’s growth where different pay and commission models work better at different times. For example, a new, small company, may offer a salesperson a commission only model which pays higher % commission but keeps a set cost off their bottom line. As the company grows, this model becomes less effective and requires changing

Ultimately, most of us will want to see a fair system within a company. The argument of fairness, for me, falls down when we are looking to compensate those who work at the CEO level. There is a challenge for companies to attract the right talent to their organisation and this needs to be a fair market rate. The market decides what these individuals’ salaries should be.

That is true at the higher levels of job role as well as the lower levels. Where you have an abundance of unskilled workers, the demand is lower, the need is lower, and therefore the salary is lower too.

Who gets to make the ultimate decision on what this cap should be? And how do we decide what that cap is?

One option that is capping to a multiple of the lowest salary in the company. This may work for smaller companies but not for larger companies. A CEO running a company of 10 employees should not receive an equal salary to a CEO running a company of 500 employees.

Performance and hard work should be rewarded. When we cap a salary, we make it harder for our teams, our key members of staff to stay motivated, engaged and wanting to show up to work. If salaries do get capped, I can see there being an increase in bonus structure for CEO level roles.