After learning about all of these companies that have been brought down by their own internal controls, I thought it would be interesting to assess the compensation of corporation executives, and evaluate whether their pay is justified or not.

According to Business Week, the average CEO of a major corporation made 85 times the average hourly worker’s pay in 1990, and by 200, average CEO salary was calculated to reach an unbelievable 531 times that of the average hourly worker. The term “Pay for Performance” is the term used to define the executive salary in conjunction with the prosperity of the company. This reasoning would allow me to determine whether the company’s value should even be based on the talents of its leaders.

So how much is too much? Should the public be notified of the salaries, perks, and bonuses of an executive? Is it fair for the CEO to deserve a hefty income due to his or her education or business background rather than scaling it in terms of company performance?

General Electric CEO, Jeffrey R. Immelt enjoying the perks of his private plane.

GE, which makes products ranging from kitchen utilities to  jet engines, as well as financing projects like NBC Universal, gave Immelt a pay package valued at nearly $11.4 million. General Electric also gave him use of the company aircraft, car allowance and other perks valued at $447,191, up from $389,809 in the prior year. Utilizing the General Electric Company as a case to base my research, these are questions I would like to address in Paper 2.

About Steph P.

Business Government and Society

7 responses »

  1. Lindsey F. says:

    I think this weeks materials could aid in your paper development. This topic is a wide concern for people today and would be worth looking into further. I would try to stick to one case (like the GE one you mentioned) to avoid repetitiveness. Some other ideas to look into are the plans and initiatives these CEOs enact while in term because it’s interesting to see if they are more short-term goal focused or long-term goal focused. This could provide insight into how the CEO should be paid.

    • Steph P. says:

      I actually was looking into this weeks materials after I wrote this post and they definitely do coincide. I was hoping to stick with one case just for fluidity, but I wasn’t sure if presenting more examples would help make my case stronger. I was also hoping to present both views (compensation is fair / unfair) just to add some comparisons for analysis, and then develop my paper by looking at salary merited by proven capacities, effort, actual performance and past and present contribution to the company’s well-being.

  2. wesmw says:

    I think you bring up an interesting topic surrounding the question of how much CEO’s should be paid. In my opinion, I think several, but not all, CEOs are overpaid. However, one also has to realize the amount of hours CEOs of large corporations spend on the job. They often have to deal endlessly with board members and also have to travel around the world to meet their various business engagements. Thus, factors such as these should be taken into account when looking at how much a CEO should really earn.

  3. ems033 says:

    This may sound a little too simple, but I would consider the question from another perspective. How many people would like to be a CEO if the work to get there was done for them? How many of these people become CEOs. Seems fair that they should make more – few make it to their seats – and they are personally accountable and responsible for the entire organization! Some such corporations are worth 100s of billions of $$s.

    When you compare the CEO salary to the assets they are in control over – and the even more so, the industries and Economies some CEOs have the ability to directly affect, it seems fair they should be paid high salaries.

    In all, all I’m saying is that very few make it up to this “rung” of the ladder. So it seems to make sense to me that those who do are rewarded with the highest salaries. In terms of the worker vs. CEO pay, I’d be interested to know what other factors might have affected that significant increase. Was it that wages are kept too low, or that CEOs are paid too much? Or that corporations really only have the need for fewer and fewer people and are able to consolidate the wealth towards the top – because they have the control. And lets not kid ourselves… A private jet would be really cool.

    Plus, there is only one me, and if that company over there is offering me a private jet and this one isn’t… guess what. This place is gunna have to find a new me. Good luck!

  4. Abby says:

    This sounds like a very interesting paper idea, and one very relevant to last week’s debate. But I think that you could expand the idea to perhaps give your paper a little more depth, and maybe give you a little more information to work with. I think that along with focussing on how much money the CEO’s make, you could include the paychecks for more of upper management as well. As we learned in the Enron case, all of the top level managers were paid extremely high amounts, and the competitive atmosphere fueling those paychecks contributed to the company’s demise. I think it would be interesting to look at how company atmosphere influences compensation and vise vera, and which factor leads to the unethical behavior we all fear.

  5. Jordi says:

    Ahem ahem. Use PFEFFER too, the guy we read last week (guy, Stanford Business School Professor). He may have other work on the topic.

    Check the Aspen Institute, too, maybe?

  6. Jordi says:

    You may even find you want to link paper 2, a case, to a white paper about the broader issue.

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