Question

Are top executives paid too much? A study of CEO compensation revealed that CEO bonuses rose considerably—from 20 percent to 30 percent—even at companies whose revenues or profits dropped or those that reported significant employee layoffs. Such high pay for CEOs at underperforming companies, as well as CEO compensation at companies with stellar results, has raised many questions from investors and others. The highest gap in pay was in 2000. CEO pay at the largest U.S. firms was 376 times higher than that of average workers. The gap has shrunk to only 271 times higher in 2016, but that is still a lot higher than the 59-to-1 ratio in 1989. The Securities and Exchange Commission (SEC) now requires public companies to disclose full details of executive compensation, including salaries, bonuses, pensions, benefits, stock options, and severance and retirement packages.

Even some CEOs question the high levels of CEO pay. Edgar Woolard, Jr., former CEO and chairman of DuPont, thinks so. “CEO pay is driven today primarily by outside consultant surveys,” he says. Companies all want their CEOs to be in the top half, and preferably the top quarter, of all CEOs. This leads to annual increases. He also criticizes the enormous severance packages that company boards give to CEOs that fail. For example, Carly Fiorina of Hewlett-Packard received $20 million when she was fired.

Using a web search tool, locate articles about this topic, and then write responses to the questions in the Ethical Dilemma section below. Be sure to support your arguments and cite your sources.

Should companies be required to divulge all details of compensation for their highest top managers, and what effect is such disclosure likely to have on executive pay?

Answer 1

Yes, companies should be required to divulge all details of compensation for their highest top managers.

This article analyzes the relationship between CEO salaries and organizational performance for the 280 companies listed on the New York Stock Exchange from 2006 to 2009. Aims to influence the administration of formal reparations. Subsequently, the terms of the directors' loan are secured by an audit of what is written about the executive's connection to the salary in addition to the firm's performance. Then again, the bigger the company, the greater the temptation will be to take away a set of capabilities that may not be available to directors. By all accounts, this seems to be the next most important variable, indicating that either the executive has gained more education and skills after some time in the position or he has gained more control over the board of directors choosing the salary level. CEO, this is probably a mixture of two. Beta is unremarkable and there are negative signs that are incompatible with the expectation that the greater the risk the CEO accepts his compensation. The organizational performance variables are ROE with positive and large coefficients. This is foreseen with the introduction that CEO salaries are paid relative to how the organization operates. Next, the document outlines the success of the corporate administration in executing the remuneration on the basis of the CEO and examining the various parts of the CEO's bonus, along with questions regarding each component. The review period is after the submission of the Sarbanes Oxley Act and following the confirmation of the SEC of the Corporate Governance Rules, which affects the official compensation of the New York Stock Exchange. This paper tests the relationship between CEO pay and organizational performance for 280 New York listed companies over the period 2006 to 2009. Distribution for 2006-2009 was after the Sarbanes Act was selected, Oxley and after the adoption of the Corporate Governance Act, which affected the formal settlement of the New York Stock Exchange.

Thoughts / Comments / Critiques

According to the principle, organizations should have a board of directors set up for free. Similarly, the board should have sanctions that outline the council's rationale and obligations and require an annual evaluation of the council's performance on remuneration. The reasons and duties of the Board of Directors are determined by the administration of the necessary administration after:

(1) Audit and support corporate goals and goals related to CEO salaries.

(2) evaluate the performance of the CEO in relation to these goals and objectives;

(3) Decide and certify as a council, then again with the top executives earning the level of executive salaries based on this assessment.

(4) Advise the Board on non-payment of incentives, violence, and cost-based arrangements when the corporate governance of the organization is weak; it is stated in the letter that the director is affected

The amount and part of personal compensation. In this way, employees can be overpaid and prevent poor performance and thus reduce the link between formal remuneration and firm performance. This focus has shown the importance of adapting CEO salaries to organizational performance. They archive that officers with less responsibility for the company have the impetus to take actions that reduce the company's compliance. For example, managers who claim that two per cent of the organization's funds benefit 100 per cent from using dollars, but this only pays employees 2 per cent. Organizations appear to be adopting this idea in their compensation structure, using long-term formal investment opportunities that seek to motivate executives to continue to own.