This is for a discussion due in class. Has to be at least two paragraphs. Thank

Question

This is for a discussion due in class. Has to be at least two paragraphs. Thank you

Discussion 8

CEO PAY . . . TOO HIGH, OR JUST RIGHT?

Question

What is happening in the area of executive compensation, and what do you think about it?

Instructions

1. Check the latest reports on CEO pay.

2. Address the equity issue: Are CEOs paid too much, especially relative to the pay of average workers?

3. Address the pay-for-performance issue: Do corporate CEOs get paid for performance or for something else?

5. Address social responsibility issues: Is it “right” for CEOs to accept pay packages that reward them many times over what workers receive?

5. Take a position: Should a limit be set on CEO pay? If not, why not? If yes, what type of limit should be set? And who should set these limits—the government, company boards of directors, or someone else?

Your posting should be at least 2 paragraphs with correct spelling and grammar.  

Explanation / Answer

What is happening in the area of executive compensation?

Sarbanes – Oxley law has been passed by bush to place more accountability on CEO’s, directors & officers in an effort to avoid corporate scandal. The primary focus of this legislation is mainly on how the boards should function, defining their responsibilities. It also strips away many benefits that were offered to the executives which include executive loans; incentives based pay & blackout periods for stock option etc.

Are CEO’s paid too much?

This is true that CEO’s get paid too much when compared to anyone else in the organization. According to a survey conducted by business week in 2003, it has been estimated that CEO’s of 365 large US corporations were paid an average of $8 million which is considered to be 301 times of factory workers. CEO’s pay package includes salary, bonus, option grants etc. this is really a high percentage & must be considered for revision.

Pay for performance issue:

Generally speaking the executive’s pay compensation is tied to the returns they produce for the shareholders & the “pay for performance” is only concerned to defend the lofty stock based compensation that makes for company’s majority pay packages.

From a study conducted, it has been found that from 2006 through 2015, 23 of 423 companies has not paid executives who has delivered high performance. 18 companies over paid the ceo’s for their below average returns. Only 163 of the companies had shareholder returns well aligned with CEO’s pay. Hence this approach of aligning ceo’s pay with shareholder’s returns must be broken.

Is it right for CEO’s?

This can be considered as a right approach for ceo’s. The company is equal for everyone irrespective of the position they hold in the organization. Everyone work for the objective & the goals of the organization. Why ceo’s alone should be considered so special? This attitude must be changed by all the companies.

Whatever the revenues & profits the company generates must be equally distributed among everyone & ceo’s rewarding concept must be based only on performance & not on anything else which can reduce the payment to some extent.

Limits on CEO’s pay:

It is of course necessary to set limits on the CEO’s pay. The limits can be set by fixing a ratio from the worker’s pay or by setting standard on their performance. This can have a little control over the pay scale.

It would be better if the responsibility is given to the government. Because if it is within the organization, it won’t be that much effective & the chances of control would be less. On the other hand, if the government takes the responsibility, everyone would be forced to follow it.

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