Perhaps one contributing factor to the dismal economy is the decisions that top CEO’s make, and the compensation they receive. CNN states, “as the economy melted down, so did CEO compensation.” The average compensation for 200 chief executives at America’s largest public companies fell 5.1% to $10.8 million. This was the first time in five years that CEO compensation shrank.
So why don’t risk managers (shareholders) say that enough is enough, and limit the compensation given to CEO’s. By having so much money tied up into one person, it limits the flexibility of a firm. If you have invested so much money into one person, you expect above average returns from that investment. I feel that companies have continually overvalued CEO’s and are now paying the price for it. Just look at where AIG and all of these investment banks stand now.
If shareholders decided to compensate CEO’s significantly less, it could use this money to compensate lower level workers. This could increase worker productivity, and create more value to the firm than just one person. Thus, workers feel more tied to the firm and create a slower turnover in employees. Is there justification to complain in a pay cut when you are making millions of dollars. One extreme example would be the CEO of McDonalds making $13.4 million in 2006, while you have thousands of people working at minimum wage.
Links:
http://money.cnn.com/2009/04/05/news/top_ceo_pay/index.htm?postversion=2009040514
http://www.networkworld.com/news/2009/033009-sprint-ceo-pay.html
http://www.usatoday.com/money/economy/2007-04-10-3656879995_x.htm
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment