Ethics and ceo pay

Managerial power theories postulate CEOs and senior executives exert power over the board of directors and compensation committees in extracting rent. Google Scholar Rawls, J.

Is it ethical for ceos to be paid so much more than other employees?

Google Scholar Lewellen, W. Efficient contracting theories maintain executive compensation is a function of market forces DiPrete, Eirich, and Pittinsky , pp. Google Scholar Simon, H. References Adams, J. Correlation is evident between corporate profitability, share prices and increasing or decreasing levels of compensation Kay and Robinson , p. Likewise, if the standard practice is for firms to use unadjusted options and thus under-report expenses, to deviate from this industry norm risks that users of financial statements would not properly interpret the financial statements, with perhaps negative consequences for the shareholders. For example, executive compensation at recipient institutions of the Troubled Assets Relief Program decreased during the Great Recession, demonstrating linkage between corporate performance and executive pay Winkelvoss, Amoruso and Duchac , pp. By a wide margin. Google Scholar Goodpaster, K. While the neoclassical economic model of the firm views the maximization of the shareholders' wealth as the sole responsibility of top management, a contractarian approach regards the balancing of various stakeholders' interests as the primary task of top management. Compensation may also be increased through other mechanisms, such as income and fringe benefits Borland , p. Successful but excessive risk-taking grants managers prodigious rewards, which in turn are the impetus for such conduct Blinder

A particular fiduciary duty of CEOs is to accept no more than the minimum compensation necessary to ensure productive and effective performance in the best interests of shareholders Moriartyp. Established periodic benchmarking of compensation in firms occurs through peer group analysis.

Google Scholar Lewellen, W. Google Scholar Kant, I.

what ethical issues surrounding executive compensation

Economic considerations would dictate that executive stock options should be adjusted to eliminate the effect of overall stock market movements which are beyond the control of the executive. Despite negative public opinion, the upward trend of executive compensation has not abated.

His recent article in theJournal of Economic Issues explores the importance of sociopolitical forces for the monetary approach to the balance of payment.

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The Ethics of Executive Compensation: A Matter of Duty