CEO Pay

From Alfino: David Owen. "THE PAY PROBLEM :The World of Business. " The New Yorker 12 Oct. 2009: Research Library, ProQuest. Web. 13 Nov. 2009. http://proxy.foley.gonzaga.edu:2048/login?url=http://proquest.umi.com/pqdweb?did=1878078581&sid=2&Fmt=3&clientId=10553&RQT=309&VName=PQD

This past June, Nell Minow--who is a co-founder of The Corporate Library, an independent research firm--was among a small group of experts who met with Treasury Secretary Timothy Geithner to discuss executive compensation. The skill of top executives at running companies is often exceeded by their ingenuity in devising new ways to enrich themselves.

Alfino 19:56, 13 November 2009 (UTC)

Background

Statistics

"CEO Compensation." Forbes.com. 22 Apr. 2009. Web. 5 Nov 2009. <http://www.forbes.com/lists/2009/12/best-boss-09_CEO-Compensation_Rank.html>.

This article is a table of the top 498 CEOs based on their pay in the United States. It also shows their ranked based on the efficiency of their company along with the amount of money the will receive after 5 years working at their specific company. - Trevor

Reasons Today

"Gabaix, Xavier and Augstin Landier. "Why Has CEO Pay Increased So Much." Quarterly Journal of Economics, Vol. 123. Feb. 2008. Business Source Premier. Print. 9 Nov. 2009 <http://web.ebscohost.com/bsi/search?vid=1&hid=8&sid=1d333229-c69c-4ff2-92a3-49504b577331%40sessionmgr4>."

This article talks of how CEO Pay is directly connected to the size of the firm and the talent of the CEO. This is then discussed as the fact that CEOs generally have about the same levels of talent so that the major basis in amount of pay is based on the size of the firm. They then go into a series of scientific research proving their point explaining that companies are growing and that is the reason for the CEO pay increase in recent years. - Trevor

Reasons Past

Hayes, Rachel M. and Scott Schaefer. "CEO Pay and the Lake Wobegon Effect." Scot Schaefer. Print. Aug 2007. 9 Nov. 2009 <http://www.scott-schaefer.net/Research/schaefer_wobegon_01.pdf>.

This article talks of the supposed "Lake Wobegon Effect" occurring in CEO pay. This is the fact that many CEOs receive pay increases due to the fact that their companies do not want their CEOs to be in the below average pay compared to their peer companies. The article shows scientifically and mathematically why this effect is true in America today and why the U.S. pay has increased so drastically. They vow for more shareholder control in the payment process of its CEOs but for the most part this article stays on the more neutral side of this argument. -Trevor

CEOs Deserve What They Get

Daines, Robert. "The Good, the Bad, and the Lucky: CEO Pay and Skill." n. pag. Web. 19 Oct 2009. <http://www.law.stanford.edu/publications/stanford_lawyer/issues/72/CEOPaySkill.html>.

This article, written by Professor Robert M. Daines of the Stanford Law School, touches on the issue of how to justify the pay of CEO’s. The article talks about the research done in order to see whether the skill of CEO is related to the skill that they have in managing a company. Professor Daines found that highly paid CEOs are in fact more skilled when firms are small or when the CEO has relatively greater ability to affect the firm's performance. Also he found that highly paid CEOs who operate in large firms subject to environmental constraints perform worse than their more poorly paid peers.

Manzi, Jim. "Big-time pay ... in a big-time economy." National Review. 59. 4 (March 19, 2007): 22. Opposing Viewpoints Resource Center. Gale. INLAN - Gonzaga University Library. 20 Oct. 2009 <http://find.galegroup.com/ovrc/infomark.do?&contentSet=IAC-Documents&type=retrieve&tabID=T003&prodId=OVRC&docId=A160167595&source=gale&srcprod=OVRC&userGroupName=gonzagaufoley&version=1.0>.

This article basically talks about how CEO pay is not going to change at all in the near future. People just have to deal with the unfair pay and get on with their lifes.

Ira, Kay T. "Executives Earn Their High Salaries." Current Controversies: Wage Gap. Ed. Christina Fisanick. Detroit: Greenhaven Press, 2008. Opposing Viewpoints Resource Center. Gale. INLAN - Gonzaga University Library. 6 Nov. 2009 <http://find.galegroup.com/ovrc/infomark.do?&contentSet=GSRC&type=retrieve&tabID=T010&prodId=OVRC&docId=EJ3010529213&source=gale&srcprod=OVRC&userGroupName=gonzagaufoley&version=1.0>.

Essentially, the author of this article argues that as a society, we are asking the wrong question. The question should not be do CEOs deserve their pay, but if the CEOs create a satisfactory return on the company's investment in executive compensation. Rather than focusing on the pay of the CEOs people should focus on whether the work they produce is worthy of their pay. Many companies invest millions of dollars to secure a more than competent CEO who will lead the company to success.

Nathan- Zhao, Kevin, Charles Baum, and William Ford. "The CEO Share Of Earnings: A New Approach To Evaluating Executive Compensation." Business Economics 44.2 (2007): 120-22. Web. 15 Nov 2009. <http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=44184111&site=bsi-live>.

These authors explain that after collecting research that relates CEO pay to a companies profits from 1993 to 2007 they found that CEO's are not necessarily over paid. The researchers use a new method of calculating CEO pay that compares CEO pay to the earnings of shareholders. Their charts in the article help to visually show their findings and further support their conclusions that CEO pay is not unwarranted.

CHEN, GUOLI. "DO YOU GET WHAT YOU PAY FOR? COMPENSATION OF NEW CEOS HIRED IN TURNAROUND SITUATIONS". Academy of Management Proceedings; 2009, p1-6, 6p. 15 Nov 2009. <http://web.ebscohost.com/bsi/detail?vid=1&hid=6&sid=adbcae3b-c088-4424-9c00-1266a9fc6193%40sessionmgr12&bdata=JnNpdGU9YnNpLWxpdmU%3d#db=buh&AN=44243056>.

Essentially in this essay, the author discusses how higher pay attracts the more seasoned, experience CEOs. Often times these CEOs are needed in order to help the company out. He specifically touches upon the turnaround situations, which have been occurring in many companies during difficult times.

Superstar Acclaim

Nathan- Groysberg, Boris, Ashish Nanda, and Nitin Nohria. "The Risky Business of Hiring Stars." Harvard Business Review 82.5 (2004): 92-100. Web. 15 Nov 2009. <http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=12933070&site=bsi-live>.

This article talks about how getting a superstar CEO isn't always the best solution for a company. It states that the research that they found showed that when star CEOs change companies they often go down in production ratings and eventually do worse for their new company compared to their old company. The authors state that often these super star CEOs were so efficient at their old companies because they had the skills that specifically were needed for that companies success. The authors suggest that a company promote from within the company in order to garner the best efficiency.

Khurana, Rakesh. “Curse of the Superstar CEO.” Harvard Business Review. 1 Sept 2002. 15 Nov 2009. <http://web.ebscohost.com/bsi/detail?vid=3&hid=104&sid=f7b7628e-94c8-4ab7-b292-4ee7e1ae976e%40sessionmgr112&bdata=JnNpdGU9YnNpLWxpdmU%3d#db=buh&AN=7269403>.

In this article, the author discusses how companies nowadays are hiring “charismatic” CEOs. These CEOs have a way with words and give people alike the image that they are indeed going to rescue the company, but in reality, the “charismatic” CEO does not help the company. Now, leadership is defined as being charismatic, not experience.

CEOs are Overpaid

Adeleine, Baran. "High CEO Pay Is Unfair to Workers." At Issue: Corporate Corruption. Ed. Susan Hunnicutt. Detroit: Greenhaven Press, 2007. Opposing Viewpoints Resource Center. Gale. INLAN - Gonzaga University Library. 19 Oct. 2009 <http://find.galegroup.com/ovrc/infomark.do?&contentSet=GSRC&type=retrieve&tabID=T010&prodId=OVRC&docId=EJ3010462212&source=gale&srcprod=OVRC&userGroupName=gonzagaufoley&version=1.0>.

This article states that the increase in pay to CEOs of major companies around the United States is more than triple that of the pay increase for an average worker. It also was written in 2003 which alerts people to the fact that the CEOs have been being overpaid has been a problem for a number of years and should have been taken a look at much sooner than the recession we are now in. The author believes that the CEOs have been abusing their power for a long time and that Corporations in the end are very corrupt. -Trevor

Ron Wolf, San Jose Mercury News. "OVERPAID CEOS HAVE HIM TO THANK, CURSE :[3 STAR Edition]. " Orlando Sentinel 22 Dec. 1991,Orlando Sentinel, ProQuest. Web. 20 Oct. 2009. <http://proquest.umi.com/pqdweb?index=4&did=89062212&SrchMode=2&sid=9&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1256011473&clientId=10553>.

This article follows the ideals of a executive consultant who helped many CEOs to fatten their paychecks. This consultant now believes that what he did is actually hurting the shareholders and he believes that CEOs are taking this too far even at the expense of his job. The author talks of how the ideals of the consultant have changed and why he believes that the CEOs are being overpaid. - Trevor

Over-exaggerated CEOs

"American CEOs are overpaid and over-hyped'. " India Abroad 27 Sep. 2002,Ethnic NewsWatch (ENW), ProQuest. Web. 19 Oct. 2009.<http://proquest.umi.com/pqdweb?index=5&did=491140021&SrchMode=2&sid=7&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1256010376&clientId=10553>.

The author of this article strongly detests the fact that CEOs are getting treated like celebrities in America today. He believes that in the U.S., CEOs have recently began to flaunt their wealth and believes that this could be a cause of the high overpayment of many CEOs. He goes on to say that most Superstar CEOs will fail quite often because they do not focus on the company as CEOs have in the past and that they will jump from company to company to receive more money. - Trevor

Ellen Simon Associated Press. "Celebrity CEOs no guarantee for success :[Home Edition]. " Journal - Gazette 14 Feb. 2005, ProQuest Newsstand, ProQuest. Web. 20 Oct. 2009.<http://proquest.umi.com/pqdweb?index=19&did=794161571&SrchMode=2&sid=12&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1256013000&clientId=10553>.

This author talks of how academics agree that celebrity CEOs are worse for a company than those that fly under the radar. Celebrity CEOs flaunt wealth, disconnect from customers, lose focus, and can increase chances of investigation. He also says that low-attention CEOs can help a company because they do not see the need to do interviews or press conferences but instead work on what needs to be done in a company. - Trevor

Larry Yu. "The Superstar CEO Curse. " MIT Sloan Management Review 48.4 (2007): 4. Research Library, ProQuest. Web. 16 Nov. 2009.

This article comes from a very prestigious academic journal and talks of how CEOs or companies that receive awards are usually doomed for some sort of a failure in the preceding years. He relates this to people featured on sports covers or video-game covers that tend to fail in their following year. -Trevor

Khurana, Rakesh. "Curse of the Superstar CEO." Harvard Business Review Sep. 2002 Vol. 80 Issue 9: 60-66. Business Source Premier. Article. 15 Nov. 2009 <http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=7269403&site=bsi-live>.

In this article, the author talks of how a superstar CEO is actually damaging to a company. The author talks of how the fact that having a superstar CEO came to be and three reasons why having a superstar CEO or hiring a superstar CEO can damage a company that most likely is already damged if they are hiring a new CEO.-Trevor

Scandals

Wahlgren, Eric. "If Only CEO Meant Chief Ethical Officer". Business Week (Online). 13 Jun 2002: ABI/INFORM Trade & Industry, ProQuest. Web. 8 Nov. 2009 <http://proquest.umi.com/pqdweb?index=4&did=125298221&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1257716444&clientId=10553>

The author discusses in this article the prominence of greed in the world of CEOs, and how greed equates to the ever-growing scandals arising from the top paid executives.

Novack, Kate."CEO scandals: Get your scorecard." Time. 23 Jun 2003: Research Library, ProQuest. Web. 8 Nov. 2009. <http://proquest.umi.com/pqdweb?index=19&did=353025761&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1257716416&clientId=10553>

The six big CEO scandals during the 2000s including Enron’s fraudulent executives appear in short, summarized forms.

Proposed Solutions

CEO Pay Caps

Wartzman, Rick. "Put a Cap on CEO Pay." BusinessWeek Online 15 Sept. 2008:12-12. Business Source Premier. Article. 9 Nov. 2009 <http://web.ebscohost.com/bsi/detail?vid=4&hid=103&sid=1d333229-c69c-4ff2-92a3-49504b577331%40sessionmgr4&bdata=JnNpdGU9YnNpLWxpdmU%3d#db=buh&AN=34385395>.

This article suggests a solution to the CEO pay problem by putting a cap on the amount of money a CEO can receive based on the average pay to his company. Therefore to receive a raise a CEO must raise the wages of every employee therefore stopping much of the incredibly large gaps in payment in companies in the United States. The author keeps in mind though that the only huge bonuses should go to those that go above and beyond in the company and show a factual profit increase for the company. - Trevor