The Global Ethics of Fat Cat Compensation in the Age of Recession

The Global Ethics of Fat Cat Compensation in the Age of Recession

When American jobs were lost and salaries and benefits cut during the recession of 2008, some Americans were infuriated to learn that CEOs of major American companies continued to be paid what to some were unjustifiably high compensation packages. Thus some people proposed that CEO compensation be capped, while others protested that limiting CEO pay would hurt corporations and their shareholders. Congress has gone back and forth on the issue. Meanwhile, CEOs in other countries do not earn as much as their American counterparts. This fact fuels the debate since those who want to restrict CEO compensation insist that if companies in those countries can attract talented CEOs with the smaller compensation packages, then American companies can and should do the same. The controversy over American CEO compensation raises several ethical issues and their respective value conflicts that have global implications. In fact, huge American CEO packages can have a negative impact globally and this level of pay is thus unfair and socially irresponsible.

Before examining the arguments for and against large CEO pay and its consequences, it is necessary to explain certain terminology used in the debate. Definitions of certain financial concepts follow: “CEO compensation” in the U.S. includes salary, stock options, severance packages (golden parachutes, golden coffins), security services, financial planning, cars, drivers, jets, fitness trainers, tickets for sporting and entertainment events, and more (Strauss 1). A “stock option” is the right to buy company shares at a set price for a specified time. Firms use stock options because of a theory in economics holding that managers will not take risks unless given a huge incentive. The incentive is that a CEO can make a lot of money buying stock at a price lower than market value, but loses no money if the shares go down in value before he or she...