Successful CEOs Deserve their Huge Salaries Essay

A CEOs whose wealth was tied to a change value of shareholder wealth had a better compensation that a CEO who had a higher monetary compensation. This analysis led to the increase of stock options for CEOs and top corporate executives. However, this type of compensation structure has unintended consequences tied to it. Stock options create incentives for executives to participate in risk seeking activities. It creates a positive gain if the price of stock goes up, but no downside risk. So what value do CEOs offer companies and their shareholders? Just as the NFL places value on a stellar athletic performance and so-called super human ability, so does corporate America. In extremely competitive markets of CEO headhunting, the stakes could never be higher. Companies today are facing lightening fast technological advances, corporate espionage, global competition, extremely tight profit margins, innovative startups and an indiscriminate number of other issues that need to be managed by top executives. Companies not only need leaders, but also visionaries, innovators and calculated risk takers. This combination of person can be extremely difficult to find, employ and retain. When it comes to the question as to whether or not CEOs and top executives are overpaid, the question can irrevocably be answered

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 a surprise to find out how much current CEOs of the topmost companies are being compensated with millions of dollars for their contributions in the companies. The pay wasn’t like this years ago, but it has changed for the betterment of the CEOs. Congress signed the Revenue Act of 1950, which allows the organizations to compensate their employees with an attractive form of exchange called the stock option. In 1993 Congress created section 162(m) of the tax code, which prevents companies from taking a tax deduction for CEO salaries over $1 million a year; pay that varies on the basis of performance remains fully deductible. Most compensation consultants agree that this change, probably helped increase CEO salaries. Many salaries that were below $1 million has climbed to that level, since it was government-endorsed they took the opportunity to raise their pay. For instance, Steve Jobs received the salary of a lump sum of $381 million which

The issue of chief executive officer compensation is the subject of dilemma in the United States. This dilemma often triggers questions as to who decides what compensation is rewarded, as well as how compensation is rewarded. The government strongly resents the current pay-ration between CEOs and the average salary of American citizens. Since the financial crisis, people have shown their displeasure with the hefty compensation chief executive officers receives. But when stunning management failures and unprecedented destruction of shareholder value are brought into the light, it becomes increasingly difficult to defend current executive remuneration policies with these economic underpinnings. For example, the “Occupy Wall Street” movement began in 2011 in protest of the increasing disparity of wealth among other reasons lying within corporate America. The peak of CEO compensation came in 2001, and it is still difficult to argue whether the financial crisis of 2008 or the change in compensation strategy has slightly stagnated the exponential growth the started in the mid 1970’s.

There is much controversy regarding the paychecks of CEOs, people from all over the world think that chief executives are paid too much compared to the salary of the average unskilled worker. These people have a point, as statistics show that the average CEO makes around 350 time the money that an average worker does only in the US, these data is not substantially different if compared to other countries across the globe. Social inequality is a factor regarding these perceptions, the poor are becoming poorer while the rich richer, due to this fact society might regard the salary of such high-ranking corporative officials as exessive. The high salaries endemic to CEOs might show counterproducing, according to a study performed in 2014 by economists Michael Cooper, Huseyin Gulen and P. Raghavendra Rau demonstrates clearly that highly paid CEOs

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.

In 1980, CEO 's made 42 times the pay of an average worker. The disparity has grown so much that in 2013 the CEO to worker pay ratio was 744:1. America is supposed to be a land of opportunity, a country where hard work and playing by the rules would provide working families a middle-class standard of living. But in recent years, corporate CEO 's have been taking a greater share of the economic wealth while wages have stagnated and employment has not fully recovered.

First, Classical economists attribute the rise in executive compensation to the growing size of modern businesses. Considering managerial talent has a multiplicative effect by firm size, it is no surprise that managerial talent is more valuable in higher market capitalization firms and thus that larger firms must then offer increased compensation in order to secure the top managers in an efficient labor market, (Rosen). And, since minute increments in managerial talent are multiplied given the sheer scope of the executives’ control resulting in huge increases in firm value according to Frydman, an efficient labor market would have it that incremental changes in managerial talent require similarly much more substantial jumps in compensation. As such, the 500% increase in average executive compensation since 1980 can be fully explained by the 500% increase in the average market capitalization over the period, though the distribution of compensation has spread, in no small part due to the precision with which managerial talent can be discreetly measured in the age of information, (Gabaix & Landier). In fact, Gabaix and Landier found that:

In any job, there is a pay scale difference between entry level positions to managers and to the highest executives. Many people assume that we are just paid solely based upon our position; where in some cases, not all, this is very true. This paper will focus on the question “Why do executives receive such high compensation and how it affects our democracy?” In corporate America bonuses and compensation differentiate amongst the working forces; the most important factor in the recruiting and hiring process of the best talents are the compensation policies and packages. Also, the attractiveness of salaries and bonuses incentivize potential candidates to seek out these top corporations for employment. Given that the money

"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.

Compensation for the 25 CEOs with pay surpassing corporate taxes averaged $16.7 million, according to the study, compared to a $10.8 million average for S&P 500 [.SPX 1204.09 -11.92 (-0.98%) ] CEOs. Among the companies topping the IPS list: eBay [EBAY 33.10 -0.59 (-1.75%) ] whose CEO John Donahoe made

It is a well-known fact that huge sums of money is made by many executives holding high positions in companies. In the United States, it has become a debatable issue as many CEOs are making abnormally more than other employees in the same firm. Some say that they do not deserve the amount of money that they are paid. The people arguing this way feel that for the amount of work that is done by these executives, their compensation is simply too high. They also believe that these overpaid CEOs often do insufficient job, while still managing to reap the benefits of being a top paid executive. Whilst these are viable arguments against this issue, there is other school of thought on the other side of the spectrum who argue that this

According to one estimate, the total median CEO pay at the nation’s 350 largest publicly-owned firms grew from $2.7 million annually in 1995 to $6.8 million in 2005. The overall increase in CEO pay has outstripped inflation and the growth in non-managerial pay over the same period. Equally important is the trend in the composition of CEO performance-based pay which includes stock and stock option grants. Median pay grew from $1.3 million in 1995 to $4.4 million in 2005 (Labonte, & Shorter, 2008).

Currently, there is an increasing argument about whether CEOs’ salaries and compensation packages have become excessive, consequently, should be regulated. According to the High Pay Centre (n.d., as cited in, West, 2016) and the Tim Bush (n.d., as cited in, West, 2016), chief executives from FTSE 100 received a salary of £4.96m a year which is 180 times more than the average UK employees’. This essay argues that the compensation and salaries for chief executives are excessive, therefore, should be regulated. In this essay, the reasons for why CEOs’ compensation is excessive will first be argued, then the stakeholders’ power and influences on companies’ performances will be discussed.

Chief Executive Officers (which will be referred to as CEOs for the remainder of this paper) is arguably the most prestigious position an individual can hold in the business world. There is no disputing the high level of responsibility necessary to manage the operations and resources of any company, while also being the key figure between the company’s board of directors and the stakeholders which are effected as a result of the company’s actions. Despite the high level of responsibility, it is worth asking a question that has been up for debate not just in recent years, but for the past several decades, which is whether or not CEO compensation can be justified? Just to put into perspective how much one of Canada’s highest-paid CEOs makes,