Summary: Should Ceos Be Paid Based Off Of Their Qualifications

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.

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.

1. Do you think the fact that most American CEOs are paid so much more than rank-and-file employees suggests CEOs are overpaid? Explain.

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.

A CEO is responsible for making decisions that affect the wealth of a company, they may cut backs, they lay people off, etc. When the CEO saves the business money he himself is rewarded with a cut of the money saved just for making a few decisions and doing a little math. He (or she) makes more then anyone else in the company, for what making cost beneficial choices? While the workers

CEOs have benchmarks to see how they are performing and how the company is growing. Pay for performance is a common term used to define expectations that CEOs pay in annual bonuses and long-term incentives should correspond with and how the company is performing and also superior shareholder returns relative to similar companies. Usually, the performance of the company operating performance is tied directly to its year to year stock earnings. Worldwide pay for performance has gained considerable prominence as CEO pay because it has “attracted political, regulatory and economic attention.” (1) (8) How accurately does earnings per share show how much the CEO should be paid.? Companies like using stock to define CEOs pay because it pleases shareholders in the company. EPS, which is profit divided by the shares of stock outstanding, has multiple flaws as a measure of performance. A growing EPS could be due to a rising economy, which the CEO had nothing to do with. Industry demand rises or other industries go into a winter push EPS up with

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

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

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.

Though out this lesson and learning about the CEO’s and the many issues of their pay….should they be paid wh8at they are paid, etc. I believe all are worthy of hire and pay, that actually make a difference in the company. If they have made a major change for the good of the company and those who work for them; then yes pay

The philosophical desert view contends that if employee pay cannot be drastically increased, then the CEO pay must be drastically reduced. With this framework, it 's quite easy to understand and agree with the fact that the rich are richer and the poor are poorer and that this is morally unjust. Following this reasoning, the most logical solution is to take from them and redistribute down. But first, lets examine why people want to keep CEO compensation high. Many people have bought into the supply-side lie of economics known as trickle down, which mean tax cuts for the wealthy. But as everyone should be able to see,

Chief Executive Officers make a lot of money. In fact, the average CEO earns 212 times that of the average American worker in the United States (Stelzer, 1997). This means they earn six to seven figures just on average. Some earn way more than this. Many people question whether CEO’s deserve to earn this much money. Is it fair that CEO’s live in such luxury, while some of their employees work very hard and still struggle to make ends meet? This question is complicated enough. However, it gets more complicated when this question is asked about nonprofit organizations. Should nonprofit CEO’s and other executives receive compensation that is comparable to the market, or is that taking advantage of the resources that have been generously given to the organization by people who want to see those organizations do good and accomplish a mission?