Do CEO’s Get Paid Too Much?
How much should a CEO make? In that vein, how much should a professional athlete make, an actor, or a school teacher? There is a debate about on how CEO’s should be compensated. Jeff Bezos at Amazon is well known for paying his executives a very low salary relative to the market. He made them buy stock. Executives had to make their money by improving the stock. This is an interesting way of paying people. I don’t necessarily agree because an executive may do a great job but the stock stays low. One person has very little impact on making the stock go higher, though their actions can most certainly make it go lower.
Another way of paying CEO’s is tied to a multiple of so many times above the lowest salaried employee. The gap between lowest paid and highest in most public companies has never been larger.
CEO’s work for the Board of Directors. For public companies, the Board is supposed to look after shareholder interests. They set the pay for the CEO. A CEO can negotiate for salary, but in the end, the Board decides. For the most part, it is a business decision. There is a general market rate for CEOs in a certain market. If a Board wants talent, they will need to invest in people.
CEOs are an asset to a business that a Board feels will enhance the value of the firm. Just as a movie studio invests in actor for a movie, or a sports team in some athlete. It is all about increasing the value to the organization.
Do CEO’s make too much money? Ask the Board, see if the stock price has improved. It is all about improving value.
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