Are Ceo's Overpaid? Essay

3107 words - 13 pages

Plato, the great philosopher, once said that no one within a community should earn more than five times the wages of an ordinary worker. Today, wherever Plato is buried, he is rolling over in his grave. In the most recent studies, it has been found that CEOs can make up to 400 times that of the lowest paid worker in their corporation (Lipman). Executive pay is a huge controversy in today's society. There is much debate throughout the media as to whether or not CEOs deserve the outrageous salaries and bonuses they receive. Both sides of the argument present very valid points. However, the reader must analyze each side and choose the one which appeals to them the most. There are numerous ...view middle of the document...

This only led to the explosion of options and other non salary bonuses.The most recent discussion regarding CEO pay has landed in Congress. In December of 2005, Barney Frank, a representative from Massachusetts introduced the Protection Against Executive Compensation Abuse Act. This bill would require shareholder approval of all CEO pay plans (Colvin). Representative Frank's proposal is causing much debate not only in Congress, but in the media world as well. Even though the topic of CEO pay has always been popular, more recently it has been one of the nation's top issues. Also, the Securities and Exchange Commission has proposed making companies provide a more detailed plan of their executive compensation plan, including salaries, differed compensation, as well as perks ("CEO Dough").One of the main questions raised when it comes to executive compensation is whether CEOs are making deals more for their own benefit than for the benefit of their shareholders. According to James P. Melican of Proxy Governance Inc., "Mergers are tarnished when it appears that managements have negotiated lucrative employment contracts for themselves with the acquiring company." (Barrett et al.). In today's economic society, companies are merging quite frequently. Sometimes it seems as if the huge payouts executive's get from a merger are benefiting the CEOs whose companies flaws made them susceptible to takeover.Some suggest that CEOs do not do nearly enough work to deserve the pay they receive. In an article titled, "The Care and Feeding of the Truly Greedy: CEO Salaries in World Perspective" the author, Lisa Newton claims that CEOs, "keep the company on an even keel, no scandals, distribute profits regularly, but remember to keep some of those profits to reinvest for the long term, because the long term is what you're in for" (Newton 237). Newton then describes the ways a CEO can put lots of money into the shareholders hands. First, he can rid the company of all extra expenses, ultimately devaluing the product. Second, he can raise the price, which would reduce sales. Third, he can try and develop new products which require more investment. Finally, he can cut costs. The easiest way to cut costs is by cutting jobs. According to Newton, "Fire lots of workers and you save lots of money." (Newton 241). Millions of jobs will be lost, yet costs will go down, and the stock prices will go up. This sequence of events is what causes CEO compensation to be so high.Another argument against outrageous executive pay is that it is downright wrong. Morality comes into question when a person is making thousands of times more money than some people, especially when some of those people are starving (Newton 242). CEO's should be more aware of their earnings and realize that they have more than enough money. With all the problems in this world, a person with millions of dollars should be able to make a huge difference by sacrificing some of their earnings.Outsourcing, a major issue...

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