Gb542 Unit 3 Assignment

Ethics and the Compensation of Top Level Employees

Overview of Issue

Compensation of CEOs has been a topic of debate during a time when this country is experiencing high rates of unemployment, housing foreclosures, and increases in the demands for government assistance. Helen Kennedy of NYDailyNews.com reports that twenty five CEOs from top American corporations were actually paid more during the last year, than their companies paid in taxes. As an example, Boeing CEO Jim McNerney took home $13.8 million dollars in 2010, which was $800,000 more than the corporation paid in federal taxes. These companies cited reported average global profits of $1.9 billion in 2010. However, due to the fact that 18 of these 25 companies “have subsidiaries in offshore tax havens like Luxembourg”, most of the companies actually received a tax refund of $304 million instead of paying taxes and helping to ease the country’s money problems. (Kennedy, 2011) Representatives of these companies insist that they pay what they are supposed to pay in taxes. At the same time, the “average paycheck for the CEOs of the nation’s biggest 500 companies was $10.7 million, while their average employee made $33,121”. (Kennedy, 2011) When one adds bonuses to these salaries, the average compensation of these CEOs grows to $16.7 million. This issue is not a recent development, but the outrage is growing due to the economy taking a downturn and the government running out of money.

Bloomberg Businessweek reported in 2008 that that “from the end of World War II until the mid 1990s , prominent public and private company CEOs almost universally viewed their responsibilities as being equally split among shareholders, employees, customers, and the nation”. (Hindrey, 2008) For the greater part of the 20th century, CEOs earned around 20 times more than the average employee. There was none of the excesses that are seen now in the financial industry that allows the CEOS to earn exorbitant...