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Do I believe most CEO’s in the US companies are overpaid versus how they perform?

I am very disappointed by the fact that CEO’s make between 350 to 1000 times the average salary of an employee. I find the idea of paying CEO’s very huge amounts of salary very repulsive since their performance does not coincide with their humongous salaries they acquire. The idea in my opinion breaks the principles that America was founded upon .The guideline of ensuring domestic tranquility and promoting general liberty I believe is also hugely violated. I believe most CEO’s are overpaid in the USA this is a result of selfish and corrupt corporate deals. The saddest thing is that while the average worker receives almost nothing the CEO’s receives bonuses, enormous wages and are under an umbrella clause.

A survey conducted by the business week indicated that in 1980 a CEO In a major corporation earned about 42 times more than the average worker. Surprisingly enough the figure by 1980 had escalated to up to 85 times. In 2000 the figure was an imaginable reaching up to 531 times. Recently the aspect of pay for performance has started being critically analyzed by corporations. The move aims at binding compensation with financial success of a company. Most CEO’s presume that their talent is the cause of the marvelous appreciation of the value of a company which is not the case.

In my opinion CEO’s are overpaid and the move has very little effect on the CEO’s performance. The salary has no quantifiable result on the performance of the company they head. The only measurable impact that is evident is the ever increasing gap between the workers who are depend upon to provide result and the so called CEO’s. Management professionals should intervene to handle the situation and bring equity on matters of compensation for both sides. Respect and trust can still be salvaged between the individual contributors and the upper management. I predict that if an immediate action is not taken then resultant motivation and worker motivation will plummet.

The human resource department on the other hand fights back and defends the escalating pay packages belonging to the senior executives. The department explains that the move is intended to compensate and avoid the risk of an outsider CEO being brought in to handle an operation that is in jeopardy. An outside CEO according to the department could bring a lot of chaos to the organization. Paying the current CEO’s high salaries is just to them. I tend to agree with the fact that new CEO’s lay off older team members and bring in their new members who they presume to be more reliable. Their aim is to bring in new ideas new energy and new blood but the move has multiple ripple effects. The biggest effect is on the erosion of the successor bench power.

The move opens doors for more trouble where the new team needs approximately one year to develop a strategic plan and another year to confirm if it will work. Rapid results will be expected especially from huge shareholders such as pension funds therefore a further move to fire older second tier managers and recruit new ones. Therefore the department or board will hold on to the CEO they hired to avoid all these problems as long as they trust the individual. Due to fear of losing the individual they cave in to the demands the CEO makes such as a demand for a humongous salary.

To avoid a situation where the salary of a CEO’s is almost unreasonable when compared with that of an average worker the board should aim at promoting internal candidates as a tactic to handle the situation. The salary of a newly promoted senior executive is more likely to be realistic than that of a newly brought in CEO’s from a different company. I believe the board should also avoid treating the CEO’s as a savior or a supreme being but should focus on developing and learning the individual’s performance curve. The move is essential for corporate survival. I am sure the promotion of internal candidates is the ultimate solution to the problem of overpayment. Internal candidates will appreciate the figure or amount of salary that the board will offer no matter the wage since a promotion is an automatic indication that an individual’s work is being appreciated. Their overall performance too as I also noted seemed to take an upward trend since they had to prove they are fit for the task.

The issue of wage imbalance I believe is therefore a detrimental to the welfare of the society and progress. Over paying CEO’s is no longer just since their performance and results do not match with their huge salaries. Technologists, nurses, cooks, doctors, teachers and other professionals who are hard -working ensure the human race progresses well every day. I also believe CEO’s deserve a higher salary than these professions but not a by a figure that is disproportionate. A difference that is not only demoralizing but also repulsive to the rest of the majority of the populace should not be allowed. There is therefore need to share the wealth accumulated across the board for real progress to be noted.

Works cited

Marianne, Bertrand. “CEOs,” Annual Review of Economics. London: University of London Press, 2009. Print.

Stendhal, Mullainathan, “Agents with and without Principals,” .New York: American Economic Review Expert Press, 2008. Print

Steven, Neil “Are US CEOs Overpaid?” Academy of Management Perspectives. Washington: Government printing office, 2010. Print.

Joshua, Rauh “Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?” New York: Rockport Publishers, 2011. Print.