Role Of A Chief Executive Officer

1806 Words Sep 14th, 2016 8 Pages

During the recent, very serious economic recession, the financial media focused a lot of attention on the compensation paid to top business executives (Ford & Zhao, 2009, p. 13). Executive compensation plays a fundamental role in attracting and retaining quality managers and provides motivation for executives to perform their duties in shareholders’ best interests (Anderson & Bizjak, 2003, p. 1324). Compensation paid to top executives of publicly traded corporations is a politically sensitive area, with critics claiming that amounts paid to executives are too high, and corporations arguing they need to pay to attract (Balsam, 2014, p. 3). Research has shown that when a corporation is performing poorly, shareholder proposals on executive compensation are likely to be made, and more recently shareholder proposals have sought to tie executive pay to performance (Balsam, 2014, p. 4). With this in mind, this essay is constructed to evaluate the role of a chief executive officer (CEO) and argue whether or not they are being overpaid, when looking in terms of company performance.

Role of a Chief Executive Officer

In order to truly understand whether a CEO is overpaid or not we need to first analyze the role in which a CEO has on the performance of a company. With an increasingly uncertain and turbulent environment, coupled with growing organisational complexity, suggests a greater centrality of the role of the CEO (Zuckerman, 1989, p. 25). According to…
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