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Overpaid CEOs, Research Paper Example

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Research Paper

There is a broad base of opinion today that considers that CEOs are grossly overpaid for the amount of work they do relative to the success or failure of their organization.  This is partly due to the media attention in recent years on the failure or collapse of some high-profile public companies and the excessive severance packages they pay to their already excessively compensated senior executives.  This has focused more recently on the widening ratio between executive and worker pay and the fact that many CEOs earn 260 times more than their lowest paid employee(Foroohar, 2010).  The subject has also been highlighted by some disgruntled shareholders of public companies, who feel that CEO salaries have increased even though the company’s performance has fallen resulting in reduced shareholder dividends.

As a result of the media attention and the economic downturn caused by the troubles in the financial industry, there have also been political moves, including proposed legislation, to have companies declare executive compensation and how it relates to worker pay.

It is difficult to argue that such high levels of compensation are justified and it is not even clear that paying CEOs more actually motivates them to perform better.  Above a certain compensation threshold, they are often better motivated by challenge.  It is time to make a stand to stop this pay inequity.  Shareholders of publicly traded companies are being empowered to have a say in executive compensation levels in the companies in which they invest (American Federation of Labor, 2011), but while the results of these votes are non-binding, they may help to encourage company compensation boards to think twice about recommending higher monetary incentives for executives.  Given that average worker pay has fallen in real terms since the 1970s, it is not unreasonable to ask board directors and senior management to tighten their belts as well in these increasingly uncertain economic times.

Works Cited

American Federation of Labor. (2011). Executive Paywatch. AFL-CIO.  http://www.aflcio.org/corporatewatch/paywatch/

Foroohar, R. (2010). Stuffing Their Pockets. Newsweek, http://www.thedailybeast.com/newsweek/2010/09/04/why-do-ceos-make-so-much-money.html

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