This paper will discuss the reasons why CEOs are not being overpaid. It will apply the utilitarian ethical principle to many a few aspects to CEO compensation and whether or not it is justifiable for such pay. The paper will look at whether or not their performance is justifiable for the pay because they play such a big role in the livelihood of the company along with the principle agency theory and how it is being addressed for the benefit of the shareholders and others involved with the company, the supply and demand of the CEOs, and the paper will describe the comparison of other professions to help link the idea of CEOs being fairly compensated.
CEO compensation has been a heated debate for many years recently, and it can be argued that they are either overpaid or that there payment is justified by the amount of work they do and their performance. To answer the question about whether CEO compensation is justified it must be looked at by the utilitarian viewpoint where the good of many outweighs the good of one. It is true that many CEO’s are paid an exorbitant amount of money; however, their payment is justified by the amount of money that they bring back to the company and the shareholders. There are many factors that impact the pay that the CEO receives according to Shah et.al CEO compensation relies on more than just the performance of the CEO, there are a number of factors that play a rule in the compensation of the CEO including the fellow people who help govern the corporation (Board of Directors, Audit Committee), the size of the company, and the performance that the CEO accomplishes (2009). In this paper the focus will be on the performace aspect of the CEO.
There are some CEOs where this is not the case and therefo...
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...etrieved from Forbes: http://www.forbes.com
Kavoussi, B. (2012, May 21). CEO Salary Report: 2011 Executive Compensation More Correlated With Company Performance than 2010. Retrieved from The Huffington Post: http://www.huffingtonpost.com
Pomerantz, D. (2013, July 16). Robert Downey Jr. Tops Forbes' List Of Hollywood's Highest-Paid Actors. Retrieved from Forbes: http://www.forbes.com
Shah, S. Z., Jarved, T., & Abbas, M. (2009). Determinants of CEO Compensation Empirical Evidence from Pakistani Listed Companies. International Research Journal of Finance and Economics, 149-159.
Sumo, V., & Weitzman, H. (2013). Are CEOs overpaid? The case against. Retrieved from Capital Ideas: http://www.chicagobooth.edu
Worstall, T. (2013, March 01). Solving The Principal Agent Problem: Apple Insists That Executives Must Hold Company Stock. Retrieved from Forbes: http://www.forbes.com
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