Are Ceo Overpaid? Should the U.S Congress and Senate Take on the Task of Monitoring or Regulating Ceo Compensation?

1. Are U.S. CEOs overpaid?

In my opinion, yes they are. When it comes to US’s top 200 companies, monthly average one CEO is paid of average one common man’s entire year’s salary, who are hourly paid. According to one report, some of the large compensation packages of top executives are met with outrage by groups who view this income inequality issue as one of society’s ailments. As the time passes, the increment of CEO is getting higher, year after year. Some of the data clearly shows the difference. For example, (1) in 1965, CEOs earned on average 20 times the average employee (2) by 1978, CEOs earned just less than 30 times the average workers (3) in 1989, the divergence grew to 59 times and by 1995 it was almost 72 times. (4) by 2014, the EPI (Economic Policy Institute) suggested that the ratio was 313 times the average worker compensation. So, it clearly shows the difference between average worker and CEOs earnings.

Furthermore, here are something which shows that how CEOs are compensated. CEOs earning not only based on salary, but other variables are also involved. Just like, bonuses paid for achieving targets in growth, revenues, earnings and other measures as established by the board of directors. Restricted stock grants that become valuable if and when the firm’s share price rises to a targeted level. There are expense accounts, the use of corporate assets including a corporate jet for travel. Of course, we wonder that whether they are worth all of that money. And in given visibility of CEO compensation to the external world, boards of directors are watching very careful about protecting themselves and their firms from any attack on reputation. And this is all depends on the shareholders. If the objectives of the shareholders are fulfilled then CEO will be fine. This is done by thousands of worker in big firms. In these big firms, even CEO has little impact on the work performed. One of the valid reasons of getting high pay to CEOs is that, even in poor performance and layoffs across the firms. Shareholders, too get annoyed at high CEO compensation when the price of share is low, and both the employees who lose their jobs and the employees who fear losing jobs are seemed to be more offensive at the same time. CEOs also get high concessions by the board and top executives when they leave the organization, which is also in favorable of particular CEO.

(John Reh. F, 2016)

1. Should the U.S Congress and Senate take on the task of monitoring or regulating CEO compensation?                

Yes they should. There is no wonder that Congress and Senate take on the task of monitoring CEO compensation. And they are not limited to only financial industry, but also in whole world of economy. As we discussed that in 2014, the ratio was 313 times the average worker compensation. So, U.S. Congress and Senate would cap the CEOs pay at each company at 20 times its average worker’s salary. In the United States, CEOs pay is vastly higher than necessary. Because in other countries, executive’s pay is less than one fifth that of their American CEOs. And they work as hard as U.S. CEOs. So, they should be given in limited way.