CEO Compensation

In “The Overpaid CEO” Susan Homberg and Mark Schmitt bring to attention how CEO pay in America is ridiculous in numbers as opposed to other parts of the world. Looking back, in the nineteen hundreds CEO pay was relativity average. As businesses and companies began to expand there was a demand for higher pay. Between 1978-2012 CEO pay increased by 875%! Many rules and regulations were put in to place to limit the pay of a CEO, such as the Securities Exchange Act that I will explain later on, regardless CEO pay kept getting higher and higher as many loopholes were found. Bonuses pay a large part in the salaries of CEOS’, as an effect CEOS’ tend to partake in risky behavior in order to score those big paychecks.

This paper will discuss the reasons why CEOs are not being overpaid. It will apply the utilitarian ethical principle to many a few aspects to CEO compensation and whether or not it is justifiable for such pay. The paper will look at whether or not their performance is justifiable for the pay because they play such a big role in the livelihood of the company along with the principle agency theory and how it is being addressed for the benefit of the shareholders and others involved with the company, the supply and demand of the CEOs, and the paper will describe the comparison of other professions to help link the idea of CEOs being fairly compensated.

Executive Compensation. I’m in agreement with Thomas Piketty that the one cause of rising inequality in the United States “the rise of supersalaries” for top executives (Piketty & Goldhammer, 2014, p. 298). The average American estimates CEO to worker pay ratio at about 30-to-1, which is more than 4 times what they believe to be ideal. The career review site Glassdoor reported from 2014 data that the average pay ratio of CEO to median worker was 204-to-1 and that at the top of the list, four CEOs earn more than 1,000 times the salary of their median worker with the very top pay ratio of 1,951-to-1. In some cases a CEO makes in one-hour what it takes the average employee six-months to earn. In comparison, the Washington Post reported for the

CEOs usually get paid a lot more than any of their employees and it is believed that the ratio between the CEOs salary and the average employee salary has continued to increase throughout the years (Mackey, 2014). The increase in the CEOs salary is mainly attributed to two factors: First, the required skills and the high responsibilities that are associated with this position. Second, the number of qualified people who could fill such a position is really limited (Executive Compensation, n.d.). This does explain the

2. There is no world in which the current CEO salaries would be considered justified or rational. Today, CEOs make about 344 times the average pay of workers which is up from 30 to 40 times about thirty years ago (Doc A). While they should be rewarded for success and advancing their business, there is a point where it begins to hurt both the company and the rest of the economy. It takes money away from taxpayers and is used to increase the personal wealth of millionaires.

I do not believe that just because American CEOs are paid much more than rank-and-file employees suggest that they are overpaid. Many CEOs whose salaries and compensation packages are discussed in the news are the CEOs from the largest American corporations and likely do not represent the average American CEO. Also, many times when CEO payouts are discussed in the news it is not a one year payout but instead a multi-year payout. Plus, many companies need to pay high salaries and incentives

According to Plato in an ideal society the ruler should be paid no more than four times what the lowest member of that society get paid. In 2012 the CEO compensation pay was 354 times average salary of a CEO for example Thomas Montag CEO of Bank of America received nearly 30 million dollars, Lloyd Blankfein, CEO of Goldman Sachs and Walid Chammah, CEO of Morgan Stanley were each given about $10 million in compensation during the financial crisis. The CEO of these financial institution steered the United States into worst economic crisis since the Great Depression which lead to lose of millions of jobs, homes and retirement savings.

The final reason that the companies are over paying CEOs is that the nonprofit organizations are paying their CEOs very highly. According to Peter Frumkin in his article “Are nonprofit CEOs overpaid?” he writes about “264 big nonprofit CEOs earn a salary of $207,990… and a CEO of the Cystic Fibrosis Foundation earn 389,327” (83). These are a nonprofit companies yet they are paying there CEOs quite a bit of money that could be going toward the cause they are trying to raise for. The CEOs should not be earning that amount of money when it is being given to go towards the cause that they people are giving their money for. A CEO that is supposed to find money to help find a cure for cystic fibrosis is taking a good amount of the money home that

Take severance packages for example. When the average employee in no longer benefitting the company, chances are they will be let go. Besides a final paycheck for hours worked and the possibility of unemployment collection, they do not receive anything else from the company. When a CEO is no longer performing up to standards, they are forced to resign but walk away with much more than a final paycheck. Chuck Prince of Citigroup was shown the door after the company lost $64 billion in market value, yet he left with $68 million and a cash bonus of $12.5 million (Nickels, McHugh & McHugh, 2010). Not only are CEOs paid a substantial amount more for their work, they are paid a substantial amount more to leave the company all together. In 2009, President Obama and Congress put limits on executive compensation of firms receiving money under the federal government bailout programs. The payout to CEOs leaving their companies was limited to $500,000 but it wasn’t for all companies across the board. This new limit only applied to companies who had borrowed money from the government during periods of economic downfall and hadn’t yet paid it back. Despite the decrease in monetary payout, CEOs were still allowed a decent portion of restricted stock which amounted for a fairly large payout when the stock could be sold a few years down the line.

I believe that CEO's are justified by there pay. They are not your average employee and as a result are paid higher. CEO's work there entire life's and put so much stress on there families to reach the top. There's an article that I will attach a link to that speaks about how choosing the wrong CEO can result in an estimated 100 Billion dollar loss. Imagine working your whole life and failing as a CEO. No company will ever hire you on again in that position as every move you make is watched and know by every fortune 500 company. Much like in sports the best athletes are paid top dollar in the hopes they can bring there team or business in a CEO's case a championship. The Warriors were bought by Joe Lacob for $400 million and now are worth over

Some people argue that it is wrong for CEOs to earn multimillion-dollar salaries while some of their employees are earning the minimum wage or even being laid off. Some suggest that a firm's top earner should earn no more than 20 times what the lowest-ranked employee earns. Prepare a 1,250-word paper analyzing the issue of CEO pay.

This report explores the issue of the pay that top executives make, and the reasons why they do. It also suggests improvements that can be made to make the system better. High Pay Seems Small When Compared To Company Profits Many companies pull in profits that are extremely high. When an employee of such a companies salary is compared to the amount of profit that the company earns, it starts to seem reasonable. It only makes sense that if the employee is directly responsible for the success of their company, then they deserve to get their payback. It seems ironic, but many salaries even look small once compared with a companies profits. Top Executives Are Under A Lot Of Pressure Being the CEO of a

1. Since 1980 to 2002, the competition and the growth in markets have become tougher and as a result there is a high responsibility. The executives are earning high amount just because they are running and managing companies which are growing very rapidly. Over the years the high increase inflation is generated were the ways in which payment was granted to the people, the change towards the shares from the stock options. T Those two things were happened at the same time. From 2002, the people reacted critically towards the the ways in which these executives were paid. The governance accusations of the shareholders pressurized that these executives are giving protection to themselves and are paid excessively high (Brick et al 2006). Now the executives can be eliminated in an easier way. Companies are paying them because these executives can be replaced very easily. Basically it is the title they paid on the basis of the risks they bear and outstanding performance for the coming year. On the other hand they are paid because stakeholders wanted them to be with the international market. If the companies have to give the response to a problem, there is a counter argument to sustain the option of

In 2003 the average pay for CEOs at 200 of the largest U.S. companies was $11.3 million--but there are a good number whose compensation packages approach the $100 million mark. Faced with these figures, Americans from all walks of life--who revile CEOs as greedy fat cats--are overcome with bewilderment and indignation. Astonished to learn that what an average worker earns in a year, some CEOs earn in less than a week--people ask themselves: "How can the work of a

Executives and those responsible for misdeeds should have been subject to significant clawbacks of compensation. If the reason they misbehaved and took inappropriate risks was to raise compensation, losing that compensation would be an appropriate punishment.