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

carefully planned out and considered, the total closure or failure of the organization could be at hand in the near future. In our modern age, employers know that salary is not the only factor that should be considered and that salary alone will not lead to better or more highly profitable workers alone. This is why compensation planning is important and why pay should have some connection between performance and compensation. This is why the human resources department should consider many monetary and non-monetary factors when considering how to properly compensate and motivate employees (Dessler, 2013).

The higher the difference between the CEO salary and the average worker salary, the lower the worker's performance due to the

See, Bob Reich isn't the just a single to notice disparity. Indeed, even most corporate chiefs are worried that soaring CEO compensations are askew with corporate benefit, and also normal worker wage. As working mom Nancy Rasmussen says, it just doesn't seem right. "I took a pay cut of $12 an hour. My benefits have gone down," Rasmussen says. Her voice cracking with emotion, she asks, "If you have millions of dollars, why do you need that little bit that I have?" We see it all around us: A CEO gets a huge bonus the same year he lays off hundreds of

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

Directors have awarded compensation packages that go well beyond what is required to attract and hold on to executives and have rewarded even poorly performing executives. These executive pay excesses come at the expense of shareholders as well as the company and its employees. Furthermore, a poorly designed executive compensation package can reward decisions that are not in the long-term interests of a company. Excessive CEO pay is essentially a corporate governance problem. When CEOs have too much power in the boardroom, they are able to extract what economists' call "economic rents" from shareholders (Economic rent is distinct from economic profit, which is the difference between a firm's revenues and the opportunity cost of its inputs). The board of directors is supposed to protect shareholder interests and minimize these costs. At approximately two-thirds of US companies, the CEO sits as the board's chair. When one single person serves as both chair and CEO, it is impossible to objectively monitor and evaluate his or her own performance.

The average CEO’s make roughly 53 times what medical doctors, military generals, or federal district court judges make (Bureau of Labor Statistics, 2004). Is this justified? No, I do not believe that a CEO’s position warrant a pay rate that is 53 times greater than these positions. These positions require extensive training, are difficult to perform, have a high degree of responsibility, and are in a position to make significant contributions to their organizations as well as to society as a whole.

It was reasonable for a CEO’s compensation to increase as the company expanded and became a larger entity, and the newly-granted shares and increasing stock options further aligned the CEO’s personal interests with those of the company and shareholders. In this sense, the second compensation package was also well-structured and not excessive. Seeing Sunbeam’s revenue rising and stock price climbing steeply upwards, Sunbeam’s shareholders and directors were fully convinced by Dunlap’s leadership, so they might perceive the increase in compensation amount necessary to retain and better motivate Dunlap to enhance the company’s value. Nonetheless, they neglected the fact that the increased portion of the equity-based compensation also further motivated the CEO’s dangerous behaviors pertaining to improper earnings management.

First of all, American public is very reluctant to accept the assertion that CEO pay is fair as it is largely determined by the free market for talent. When CEOs claim that they receive their fair share of benefits in a system of fair play, people are ready to express their deep dismay at the way of how the companies and CEOs distribute the profits and benefits to their workers unfairly. In her article, “These Companies Have the Biggest CEO-Worker Pay Gaps”, Dr. Michal Addady, a well-known reporter at Fortune Magazine, reveals that in 2014 “the average CEO earns around 204 times what the company’s median worker receives… The highest CEO-worker pay ratio was found at Discovery Communications DISCA, where

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

Dan Price as the founder of Gravity Payments, who took a US$930,000 pay cut in order to bring up the minimum wage of his company in America. In doing so, out of his 120 employees, 70 will be getting a pay raise and 30 will get double their current income. For Price, this means reducing his US$1 million annual salary to US$70,000. He is hoping to forward more income equality to his workforce by this move. The reason for this movement is that Dan Price has been inspired from a Princeton study, who reaches a conclusion that “the perfect salary for happiness is about US$75,000.” (Levy, 2015) From an interview with times magazine, Price explains how once you know that it’s the right thing to do and that you will definitely get more out of it than harm. He quoted from the study: “The dollars that you’re making underneath that amount are causing harm to your well-being” (Torabi, 2015) It is with that Dan Price understood how imperative it is that when you have the authority and ability to allow your employees to live life to their fullest, their potential becomes several folds more.

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

"The problem in America today isn 't that some people are getting rich. We 'd probably all like to be rich. The problem is, most people are getting nowhere,” David Bonior (D-MI) has argued. Why is it that Chief Executive Officers of large companies are making upwards of 500 times more than their average worker? And why are some CEOs only making $1 per year in salary? This paper gives a forefront for different types of CEOs, including big box retail, technology, and mom-and-pop shops, and how their salaries affect those under them.