Is CEO compensation too high? That was the question put to business students at Babson College. CEO compensation has skyrocketed recent decades going from just 40 times the average person’s salary in 1970 to 500 times today.
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Description
Chapter 5:
Corporate Governance
Executive
Excess Part 2
Run Time: 11:26
Link: http://www.youtube.com/watch?v=W4M5py_G9ZA
Is
CEO compensation too high? That was the
question put to business students at Babson College. CEO compensation has skyrocketed recent
decades going from just 40 times the average person’s salary in 1970 to 500
times today. CEOs including Jack Welch,
Michael Eisner, and Dennis Koslowski were all paid multi-million dollar compensation
packages during their tenure as CEO.
Some
students at Babson College shrug off the excessive pay packages noting that
everyone has a chance to reach the top, and those that do should be
rewarded. Indeed at least one former
CEO, Jack Welch, claims he was simply being paid what the market was willing to
pay. According to this laissez-faire
approach, CEO compensation merely reflects market forces.
Other
people though, are critical, wondering whether the mega pay is really
justified. They note that there is a lack
of oversight when it comes to CEO pay, and that conflicts of interest
abound. CEO pay packages are
determined by company boards of directors – boards that are appointed by the
CEO.
Discussion Questions
1. Is it ethical
for CEOs to be paid 500 times what other employees earn? Is it ethical for CEOs to accept compensation
packages in the millions of dollars?
2. Discuss the potential
for conflict of interest in CEO pay.
Should a company’s board of directors determine CEO pay?
3. As a
shareholder, how do you feel about CEO pay?
Is the high compensation of Michael Eisner, CEO of Disney, justified? How about that of Dennis Koslowski? Would you feel any differently if you were a
shareholder in Tyco during Dennis Koslowski’s tenure as CEO?
4. Some critics
have called for more government oversight of CEO compensation. Do you agree with this?
5. Discuss the
ethics involved when a CEO manipulates financial information to influence a
company’s stock price. Is this practice acceptable as long as it is
legal?
