Should Top Executives Make The Money They Do?

CONTENTS

Abstract ........................................................... iii
Introduction ....................................................... 1
High Pay Seems Small When Compared To Company Profits .............. 2
Top Executives Are Under A Lot Of Pressure ......................... 3
US Executives Paid Three Times More Than Other Countries For A
Reason ..................................................... 4
Pay Should Reflect Performance ..................................... 5
Conclusions And Recommendations .................................... 6
Notes .............................................................. 8
Bibliography ....................................................... 9

ABSTRACT

This report explores the issue of the pay that top executives make, and the
reasons why they do. It also suggests improvements that can be made to make the
system better.

High Pay Seems Small When Compared To Company Profits

Many companies pull in profits that are extremely high. When an employee of
such a companies salary is compared to the amount of profit that the company
earns, it starts to seem reasonable. It only makes sense that if the employee
is directly responsible for the success of their company, then they deserve to
get their payback. It seems ironic, but many salaries even look small once
compared with a companies profits.

Top Executives Are Under A Lot Of Pressure

Being the CEO of a company is not an easy job. There is all kinds of pressure
for a person in such a position to succeed. If they do not, then it is their
job on the line. Therefore, they deserve to receive a large sum of money for
the work that they do. It is the only way to compensate these employees for the
tremendous strain that their job puts on them. It is essential that the
employees get paid the amount of money that they deserve.

Pay Should Reflect Performance

When CEOs are being given big paychecks, they are expected to perform at a high
level. There success is impeccable. However, this does not always happen.
There should be some way of connecting pay to job performance. The best way of
doing this would be to award bonuses to those workers who are at the top of
their class. This would not only motivate workers to do a good job, but also
reward the employees that do succeed.

INTRODUCTION

It is a well known fact that many people holding high positions in companies
make an exorbitant amount of money. Some, however, say that they do not deserve
the amount that they are paid. They feel that for the amount of work that is
done by these executives, their paycheck is simply too high. Also, they believe
that these high paid workers often do a mediocre job, while still managing to
reap the benefits of being an executive. While these are viable arguments
against this issue, the other side of the spectrum shows that this is not so.
There is an equal amount of evidence, if not more, that suggests that executives
earn every penny of their paychecks.

The CEOs of companies are under an extraordinary amount of pressure. They face
the task of making sure that a company pulls in a profit, or possibly losing
their job. There are few, if any other positions that put an employee in this
situation. Important decisions are made by them everyday, many of which decide
whether a company will prosper, or go under. Many of these men had to work
their way to the top. They usually have extensive business backgrounds, and
know their field well. There are very few people qualified, or knowledgeable
enough to perform well in executive positions. That makes the ones that are, a
hot commodity. Thus allowing them to demand the high pay that they earn.


High Pay Seems Small When Compared To Company Profits

When the public sees a salary that they consider to be too big, they are usually
looking at only half of the picture. It is impossible to look at just the
salary, without taking any other factors into consideration. One must look at
the amount of earnings, compared to the profits of the company.

For instance, Robert Allen, who runs ATT was recently pointed out by 60 Minutes
as being an overpaid executive. Their major problem was that he had been
responsible for laying off 40,000 employees, while still managing to give
himself a large pay increase. At first glance, this situation may appear to be
one involving a greedy and overpaid executive. However, upon closer examination,
it proves to be much to the contrary. The situation wherein the 40,000
employees were laid off, was not a matter of getting rid of people for an
unfounded reason. It was more a matter of getting rid of an excessively large
work force, and