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Running head: ARE CEOs PAID TOO MUCH?

Are CEOs Paid Too Much?

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ARE CEOs PAID TOO MUCH?
Are CEOs Paid Too Much?

Introduction

Throughout the globe, remuneration of qualified executives, for example Chief

Executive Officers (CEOs), is mainly on the basis of organization’s performance. Many

organizations are always fighting to employ the most performing CEOs. Their level of

payment is generally very high as compared to other employees in the same organization.

Throughout the years, there has been a constant debate on the issue of CEOs pay. According

to Kiatpongsan & Norton (2014), organizations should try as much as possible in order to

achieve equal remuneration for all the workforce in the working places. Too much pay for the

CEOs has a negative impact on the economy of the nation. The payment gap should be

maintained at small ranges in order to avoid the issue of salary inequalities and many other

issues that may demotivate the other workers.

Firstly, too much pay has resulted in increased inequalities. All over the globe, the

CEOs are being paid more than any other worker in the workplace. This has greatly increased

the gap between the two parties in terms of salary remuneration. In the long run, it has led to

the problem of inequalities in relation to their pay. This issue ends up making other workers

feel that they are not recognized in the organization (Ridge et al., 2015). The rising of social

problems in many firms, for example, conflicts, is mainly a result of the increased level of

inequality. This has also demotivated other employees in the workplace making them

underperform in relation to their duties and responsibilities. Lowering the morale of workers

limits the success of any firm. The payment gap should be reduced in order to acknowledge

the contributions of other parties towards the success of an organization.

Secondly, too much pay has also created a negative effect on the returns of the

shareholder.
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ARE CEOs PAID TOO MUCH?
If the CEOs are given salaries that are higher than their overall contributions to the

organization, the returns of the shareholder might be stolen. The pay of the CEOs in relation

to the rate of returns meant for the shareholders is very low (Cooper et al., 2016). This has

greatly lowered the morale of the shareholders in investing in such firms. Many organizations

have gone bankrupt because of spending too much of their profits in paying the Chief

Executive Officers. The money which was meant for expansion of the business is used to pay

the CEOs. Companies should always emphasize the element of minimizing costs and at the

same time maximizing expenses.

Thirdly, too much pay of CEOs results to the financial crisis. The amount of money

used to pay the CEOs is generally very high. This has created some adverse effects on the

economy of the nation at large. Many firms have been closed because they are not able to pay

their CEOs. The amount is very high as compared to their monthly profits. The financial

crisis has mainly affected the investment banks all over the globe (Chyz & Gaertner, 2017).

For example, the largest investment bank in the United States known as the Lehman Brother

ended up being bankrupt as a result of the financial crisis. The closure of such institution

forced their government to establish some rescue plans in order to recreate them. The

government has spent a lot of money on such rescue programs. The money could have been

saved and used to develop other sectors of the economy if only the remuneration of the CEOs

was not very high or exaggerated.

On the other hand, the high remuneration for the Chief Executive Officers is mainly

due to their higher experiences and skills in relation to the particular job.
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ARE CEOs PAID TOO MUCH?
More experienced CEOs end up delivering higher results at the end. The high payment is

only meant to motivate them and increase their morale in performing various activities at the

workplace. They deserve to be paid more than any other employees because of their influence

on the general success of any organization. Many of the recent innovations are as a result of

the creative skills of the Chief Executive Officers. Innovations play an important role in

making an organization able to compete with others in the world market. Advancement in

technology has created more competitions in the business sector. The success of the

organization is attained through the inputs of both CEOs and other employees. CEOs should

not be treated as being more important than other workers in the organization.

Conclusion

In conclusion, the too much pay for the Chief Executive Officers is mainly

exaggerated. Both public and private organizations should emphasize on the issue of equal

pay. The ratio of the payment between the CEOs and other employees should not be very

high. The success of the organization is attained through the inputs of both CEOs and other

employees. CEOs should not be treated as being more important than other workers in the

organization. Unequal payment may result in the element of discrimination. When workers

are being discriminated they end up delivering poor results because of their low morale. The

payment gap should be maintained at small ranges in order to avoid the issue of salary

inequalities. The payment for the executives should be controlled so as to avoid it being in

excess and exaggerated. In the near future, the society should impose the maximum

remuneration for the CEOs.


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ARE CEOs PAID TOO MUCH?
References

Chyz, J. A., & Gaertner, F. B. (2017). Can Paying “Too Much” or “Too Little” Tax

Contribute to Forced CEO Turnover? The Accounting Review.

Cooper, M., Gulen, H., & Rau, P. R. (2016). Performance for pay? The relation between

CEO incentive compensation and future stock price performance.

Kiatpongsan, S., & Norton, M. I. (2014). How much (more) should CEOs make? A universal

desire for more equal pay. Perspectives on Psychological Science.

Ridge, J. W., Aime, F., & White, M. A. (2015). When much more of a difference makes a difference:

Social comparison and tournaments in the CEO's top team. Strategic Management

Journal, 36(4), 618-636.