Case Study: Is It Ethical For Ceos To Be Paid

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.

CEO compensation has been a heated debate for many years recently, and it can be argued

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

Federal governance in executive pay is essential to a stable and healthy economy. I offer that the issue of Federal governance in executive pay is bigger than equity in compensation. “Taxpayers and politicians and others disapprove of these levels of compensation precisely because the leaders of these firms, in the words of Treasury Department officials, nearly caused the financial system worldwide to collapse.”

The AFL-CIO released data shows that American CEOs in 2013 earned an average of $11.7 million which 331 times the average worker’s $35,293. http://www.forbes.com/sites/kathryndill/2014/04/15/report-ceos-earn-331-times-as-much-as-average-workers-774-times-as-much-as-minimum-wage-earners/#1c6e03b78ef3 . Based on the observation of the data in this site(http://www.aflcio.org/ ), the most explanatory power regarding our political and economic situation is the power elite model because easily see that the power reflect most of the time the need of the elite a theory started first by Carl mark and elaborated later by Wright Mills (1956)’’book’’ .

Excessive top executive pay is viewed by the public as a direct linkage to economic inequality or disparity. Many opinions state that over the top pay stemmed from compensation trends and indicates corporate Board of Directors as business people earning similar salaries as top executives. Pozen and Kothari (2017) reported “More than 95% of the time, shareholders overwhelmingly approve the pay recommendations.” (Decoding CEO pay, para 2). Excessive pay distorts the views of the public and injures the trust of American workers. According to Pozen and Kothari (2017), companies, legislation, compensation committees, and stakeholders need to clearly articulate the basis of their decisions for setting excessive compensation.

With the topic of income inequality becoming more prominent in the media, it is important to focus on the individuals who are taking the most advantage of this: CEOs of business firms. According to the Norton and Ariely (2011), “the top 1% of Americans hold nearly 50% of the wealth, topping even the levels seen just before the Great Depression in the 1920s.” Unfortunately, this number is only increasing with time as a result increasing the gap of average household income in the United States. To further examine pay deviation, it is important to understand the causes for this divergence. In the United States, the CEO of a company now makes 380 times the average worker’s pay in the company (Norton & Ariely, 2011). Therefore, does it mean that

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.

Some support I can use to back my claim is the difference of pay increase over time between CEO and average employees from 1980 to the present. Back in 1980 CEO made about 44 times the amount of money that their average employee was making. Furthermore, now in 2016 CEO raises are going up while employees have shown no increase in salary compared to CEO’s. I also can bring in real life examples

Subramaniam, 2001), what, exactly, is the problem with executive pay? Are CEO pay packages simply too grossly large on some absolute scale, driven by unfettered greed beyond the bounds of what is ethically reasonable? Or is the real problem the growing disparity between executive pay and the wages of entry-level workers? Alternatively, is there a problem with CEO pay from the standpoint of distributive justice, or fairness? Or is the problem simply that executive compensation does not work properly – that it does not provide the proper incentive alignment suggested by the underlying theory? I broadly explore these questions by examining

cannot overpay a good CEO and you can 't underpay a bad one. The bargain CEO is one who is unbelievably well compensated because he 's creating wealth for the shareholders. If his compensation is not tied to the shareholders ' returns, everyone 's playing a fool 's game." Today, the dot-bomb, the telecom bust, and the corporate accounting scandals seem to have done for that logic what "Chainsaw Al" did for Sunbeam. The value that many superpaid CEO

When looking at whether or not the inflated salaries of most CEOs are ethical, Michael Eisner and Frank Wells are good examples of how a smartly negotiated salary can pay off for both the company and the executive officers. In the case of Wells and Eisner, their compensation package was tied to company performance: as the company’s value and earnings increased, so did their earnings (Murphy, M., 2014). By many benchmarks, this can be considered a fair and ethical way for a CEO to earn their keep.

A considerable disparity exists today in America between a CEO and the median employee. In average a chief executive earns three hundred and four more than the medium worker (Hiltzik, 2018). The disparity is more significant in companies that employ more workers at a lower wage and lower for companies that don’t have such service level ("What you’re not being told about the pay gap," 2015). Globalization and digitalization seem to be in part responsible for the gap as the trends have made managing large corporations a complex task hence creating a need for highly specialized executives ("What you’re not being told about the pay gap," 2015).

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

It is believed that there has been an extraordinary growth of CEOs’ salaries in recent years, which could lead to an excessive compensation (Mishel and Davis, 2015). It could be augured that the high pay for CEOs is simply a reflection of the market for skills (Bebchuk and Fried, 2004, as cited in Mishel and Divis, 2015). Kaplan (as cited in Mishel and Divis, 2015), who published an economic research working paper in 2012 claimed that the high salary for CEO is not unique, as other groups with similar backgrounds have also seen a dramatic growth in their salaries. For example, the salaries for corporate lawyers and hedge fund investors have also increased significantly. As a result, the rising CEOs’ pay might be a result of a competitive market for