The Debate Over 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.

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

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

CEOs usually get paid a lot more than any of their employees and it is believed that the ratio between the CEOs salary and the average employee salary has continued to increase throughout the years (Mackey, 2014). The increase in the CEOs salary is mainly attributed to two factors: First, the required skills and the high responsibilities that are associated with this position. Second, the number of qualified people who could fill such a position is really limited (Executive Compensation, n.d.). This does explain the

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.

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

According to Plato in an ideal society the ruler should be paid no more than four times what the lowest member of that society get paid. In 2012 the CEO compensation pay was 354 times average salary of a CEO for example Thomas Montag CEO of Bank of America received nearly 30 million dollars, Lloyd Blankfein, CEO of Goldman Sachs and Walid Chammah, CEO of Morgan Stanley were each given about $10 million in compensation during the financial crisis. The CEO of these financial institution steered the United States into worst economic crisis since the Great Depression which lead to lose of millions of jobs, homes and retirement savings.

The final reason that the companies are over paying CEOs is that the nonprofit organizations are paying their CEOs very highly. According to Peter Frumkin in his article “Are nonprofit CEOs overpaid?” he writes about “264 big nonprofit CEOs earn a salary of $207,990… and a CEO of the Cystic Fibrosis Foundation earn 389,327” (83). These are a nonprofit companies yet they are paying there CEOs quite a bit of money that could be going toward the cause they are trying to raise for. The CEOs should not be earning that amount of money when it is being given to go towards the cause that they people are giving their money for. A CEO that is supposed to find money to help find a cure for cystic fibrosis is taking a good amount of the money home that

I hope this finds you well. As head of the executive compensation committee I am writing this recommendation in order to reach a unilateral consensus on the adequate amount the new CEO just hired should be paid. I want to concisely go over the pros and cons of attempting to follow industry standards and will debrief a compensation plan I have put together that reflects our values as a 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.

I believe that CEO's are justified by there pay. They are not your average employee and as a result are paid higher. CEO's work there entire life's and put so much stress on there families to reach the top. There's an article that I will attach a link to that speaks about how choosing the wrong CEO can result in an estimated 100 Billion dollar loss. Imagine working your whole life and failing as a CEO. No company will ever hire you on again in that position as every move you make is watched and know by every fortune 500 company. Much like in sports the best athletes are paid top dollar in the hopes they can bring there team or business in a CEO's case a championship. The Warriors were bought by Joe Lacob for $400 million and now are worth over

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.

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

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 study contributes to a growing body of research on the ex post shareholder value consequences of CEO pay in several ways. First, this lends support to using incentive pay as a potential instrument for addressing the conflict of interests between managers and shareholders. The market regulators therefore might want to consider the implications of taxing equity-based compensation component. Such a policy could lead to reduction in the use of equity-based compensation component, thus resulting in lower stock returns.