Question

Overall Rauny. HA In Chapter 3, Tyler Cowen discusses CEO's compensation, not just salaries. He explains why CEOs' compensations have increased significantly over time, why they are paid much more than other workers, and discuss research that CEO's compensations are driven by supply and demand, how much value they create for their company, and how their compensations vary with their company's market value. Here are a few questions to start the conversation: (1) If you think CEOs are paid too much, what's too much? (2) How much should we pay them? (3) How should we determine their pay? (4) What do you think would happen if the government regulates their pay? (5) Following up on last question, can you think of other unintended consequences associated with regulating CEOs compensation? [This question is directly related to the current heated debate between economists about a wealth tax I am not saying it's the same, I am saying one should think about possible unintended consequences of having good intentions.]

Please answer the following questions from your perspective

Answer 1

1) The CEO of a company is like the leader of a gang, however these days the extra benefits in monetary terms that are given to them are extremely unreasonable for some of the companies. They do not understand that it is done on the cost of the lower section of the hierarchy. Apart from the salary, the appraisals and hikes along with other benefits like travel and food make an earning for CEO way too much.

2) According to my perspective, the pay system should be performance. If there is an extra bonus that has to be provided to them then that should be based on a determined percentage of profit that has been earned by the company. In case there is no profit, then the CEO should not be given the benefit of extra earnings.

3) A certain percentage should be determined, like the dividend that is given to the stake holders. One can have a nasic pay that no matter what the CEO does to bring the company to profit, will go in his pocket, however further benefits will only be given based on the perofrmance of the company.

4) In case the pay is regulated by government, there are high chances that their might be feud between the private and public sectors. The government would restrict there extra benefits and might also put a bar on the amount of benefits the CEO recieves.

5) Wealth tax makes every single earning of an individual be taxed. This would however only benefit the government. With so many taxes and slabs already to fulfill, it will be extremely tough for the CEO to get through the wealth tax, It would defenitely affect the savings of the particular individual.