Ceo Pay Essay

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

According to the Wealth Inequality in America video, the CEO of a company makes 380 times more than the average paid worker. With these numbers, the average worker must work over a month to make what the CEO makes in an hour. That’s insane, there is no way that the average worker does not work as hard as the CEO of the company works, the workers are what make the company what it is. Sure the CEO has worked very hard to get to where they are in the company, but with the way everything else is, can we truly be sure that the way the CEO is getting paid is

The CEO’s compensation should be set on how well the firm performs and should be awarded based on the performance of the stocks in the long run. It is easier to measure performance by the growth rate in the profits that have been reported since intrinsic value cannot be fully

The base salary of CEOs represents 20% of his or her total salary while the remaining amount is considered incentives that is directly related to the business financial performance. In other words, if the business is successful financially, then the CEO shares part of the success (Executive Compensation, n.d.).

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.

Number Ten: The company pays its workers pretty well. The average hourly rate was at $18 in 2013, while the mean annual wage was set at $40,000. The executives’ pay is capped at 19 times the average worker’s pay. This means that they cannot earn more than 19 times the average

The problem is why do CEO gets paid 354 times greater than average employee salary of the company

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.

In Peter Eavis’ article “Executive Pay: The Invasion of Supersalaries” the conflict of CEOs and top executives outrageous pay grade is discussed. Even though the “compensation machine” of Corporate America is running smoothly, there are multiple negative and dark undertones. In fact, many people believe that these shocking salaries are the roots of inequality within America. Currently, some CEOs are being compensated millions and millions of dollars as their normal annual salary. Even though the current executive compensation system focuses on performance and can “theoretically constrain pay,” there is nothing stopping the companies from giving their CEOs more. According to the Equilar 100 C.E.O Pay Study, “the median compensation of a

Is there an ethical difference between the wealth owned by a company’s founder (e.g., Bill Gates) and the income received by a hired CEO? Do founders and entrepreneurs deserve their wealth in ways that executives do not deserve their salaries?

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

Given the effect a CEO can have on a company's success, we can understand why their compensation packages

Since bonuses are usually paid in cash and are linked to organizational performance, they reflect rewards that CEOs receive for their contribution to a firm’s economic performance and integration of stakeholder interests. Previous studies on CEOs annual bonuses have examined certain components of CEOs’ actual annual payout bonuses. The type and amount of CEO compensation is arguably important to a firm’s management and governance (Sanders & Carpenter, 1998; Zajac & Westphal, 1994). Whereas many empirical accounting literatures have established the usefulness of accounting metrics in compensating executives, , quite few studies have focused on how specific non-accounting