CEO Pay
Are CEOs Paid More than they Deserve?
The question of whether CEOs are paid more than they deserve is a contentious issue. It is a contentious issue because it evokes deeper ideological predisposition to how the distribution of resources should be handled in any modern society. Some argue that CEOs are substantially overpaid based on the rates they are paid when compared to other employees or other members of society. However, some also argue that the wages that CEOs are paid are a reflection of the market and justified by their market value to the firm. Therefore the CEO payment situation rests squarely in a more comprehensive debate about fairness in a society; a debate that rests on the individual perceptions of how well the markets can establish a rate of a particular position. This perception can be directed towards how much the top earners are making as well as the bottom wage level earners.
The debate has recently evoked political attention when the U.S. government was virtually forced to "bail out" some of the world's top financial institutions. This was a defining moment for those who believe that American CEO pay is out of control, President Obama placed a ceiling on the amount of pay top executives at financial institutions receiving federal bailout funds can receive and subsequently imposed a cap of $500,000 on top executive pay, Obama said Americans are angry "at executives being rewarded for failure" and he also pointed out that "For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it's a bad strategy -- and I will not tolerate it as president. (Anderson, Cavangh, Collins, Lapham, & Kay, 2007)"
It is easy to see why certain CEOs in certain industries are vilified. However, markets do tend to allocate resources efficiently; at least in comparison to other economic systems. Therefore it is possible to empathize with both ends of the spectrum. Certainly stable CEO succession can build continuity and shared purpose within a corporation and that is why corporations with long time frames such as oil companies tend to recruit their CEOs from within (Ahrendts, 2013). But not all industries work the same. Some industries are different because high turnover with CEOs is expected and can substantially help a company to pursue greater revenue streams.
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