Ceo Pay

Moose Winooski

Management 479

July 24, 2013

CEO Pay

Ira Kay’s article entitled, “Don’t Mess with CEO Pay” reflects on the compensation of executives in the United States. People are concerned that a CEO gets paid way too high, although there are some who believe that the CEO deserves the high pay because they bring stock prices up and increase shareholders wealth.

Kay states that the talents and skills that a CEO possesses are so rare that it justifies their high pay. Corporations also would try to do everything they can so that their CEO would stay with them. Kay also mentions that the media puts out negative remarks about CEOs and how over-paid they are, therefore “fueling a full-blown mythology of a corporate America ruled by executive greed, fraud and corruption.”

In addition to fueling the fiction, Kay believes that reporters from business magazines and major newspapers are unfair in reporting CEO pay. He states that reporters only ask him to give examples of CEOs who make a lot of money, while the company performed poorly. He mentions that he was never asked to name companies whose executives are appropriately rewarded for their performance, or boards that reduced CEO compensation due to poor performance, or even instances where the CEO was fired.

Kay mentions that there is a grain of truth in all the assumptions and newspaper stories. There have been CEOs who have collected huge sums of money in compensation and stock options while shareholder returns declined. There have been cases in the past decade where profits where overstated to justify higher pay while the board of directors sit by and do nothing.

Kay also states that when the Dow soars, the executives and non-executive compensation widens. One can therefore say that maybe the real issue is not CEO compensation, and that the real issue is taking the pay-for-performance model that is used by the executives and put it in all levels of the organization.

While Ira Kay...