Write 3 pages about CEO compensation is not justified about Ethical/Moral Objections
I. ISSUE- Is CEO Compensation Justified?
a. Geoffrey Colvin in Fortune: Sources of discontent among the masses when addressing extremely high payment of CEOs (including in the form of stocks) include:
i. Lowest paid workers advancing very slowly
ii. Layoffs of other workers
iii. Japanese CEOs are much more productive and paid much less
iv. Emotional Argument: living lavish lifestyles while the rest of the world starves
b. Selected articles for older editions of this textbook no longer suffice because their cited numbers for CEO pay are outdated
i. CEO compensation continues to increase dramatically
ii. Pay increases have resulted from rises in stock value
1. “What are we to do with compensation of ‘insurance’ policies that guarantee the same compensation no matter where stock goes?”
2. Even though shareholders dictate some policy and everything is legal…”If the result is substantially unjust, should not the people as a whole step in and rectify the situation?”
c. Stock price success and CEO compensation are not as correlated as some suggest
i. 2000: average investor lost 12% on portfolios and profits rose at less than half from the 1990s, but CEOs saw average 22% compensation raise
ii. 2005: Peter Cartwright of Calpine was paid average $13 million each year for six years, while the ROI was only 7%
d. So what do we do if it’s not justified?
i. Should government regulators step in?