Recent research has shown an inverse relationship between CEO pay and corporate
ID: 380207 • Letter: R
Question
Recent research has shown an inverse relationship between CEO pay and corporate performance. Read the article "The Highest - Paid CEOs Are the Worst Performers, New Study says." Or, arelated articles. Assume that you are the public relations professional who must respond to recent inquiries from major investors regarding the compensation and performance for your company's CEO.
2. As a potential investor, how would the CEO's compensation affect your decision of whether to invest in a company? Why or why not? Please answer the question in full details, thank you.
Explanation / Answer
Ans: CEO's compensation does not always mean that a company is doing very well. However, in many cases, a higher compensation ( Both fixed and performance based pay) indicate a positive correlation between the performance and pay, but the rate of increase in CEO's pay has fast overtaken the rate by which the stock prices have advanced, indicating rising pay despite of not so good performing stocks.
This indicates that while investing in a company, there is much more to be seen beyond the CEO's pay, like short term and long term financial performance of company, financial stability, future prospects , company's relationship with the customers, options of exit and so on.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.