Don’t Mess with CEO Pay
In a corporate environment, the role of every company member is clearly delineated and strictly adhered to to ensure effective management of core goals. Like the rest of the participants, CEOs play a crucial role, without which a company cannot function. However, given the significant discrepancy between the payments received by other staff members and the benefits offered to CEOs, the latter might be perceived as a liability. Nevertheless, the payment offered to CEOs must be maintained, as the input CEOs provide cannot be replaced or replicated by other team members within the company.
The responsibilities CEOs face in the corporate environment are significantly greater than those of other employees. Specifically, CEOs must envision the company as a single entity and control every aspect of its mechanisms’ functioning (Jihene and Moez 4). The weight of responsibility that CEOs bear warrants an appropriate level of remuneration. Furthermore, when considering the reduction in benefits offered to a CEO, a broad array of factors must be taken into account (Jihene and Moez 7). As a result, calculating the benefits that must be offered to a CEO becomes nearly impossible, necessitating a higher payment option to ensure appropriate remuneration.
Since CEOs perform a unique function that requires a broader range of skills and increased responsibility, they must be compensated with higher salaries. The specified benefits will help avoid the challenges of accurately calculating CEOs’ remuneration, which would require excessive time, given the numerous factors involved. For this reason, CEOs need to be offered higher compensation than the rest of the company’s members.
CEOs Are Being Paid Too Much
In the corporate environment, the input of every staff member should be valued equally and rewarded accordingly. While one must acknowledge the differences in the range and complexity of tasks performed by employees and offer them proportionate remuneration, it is essential to maintain a consistent compensation framework. However, within the specified system, the salary offered to a CEO is typically considered unreasonably high. Since a CEO receives the same amount of money regardless of a company’s performance rates, reducing the amount of financial resources allocated to their salary is a legitimate solution to the issue.
At first glance, one might argue that the complexity of their work justifies high CEO compensation. However, adopting a results-oriented approach reveals that CEOs are often paid the same salary regardless of the company’s performance. (Hoi et al. 499). Since the payment for the CEO’s functions is fixed, appealing to the effectiveness or complexity of the work does not seem reasonable (Hoi et al. 501). Therefore, offering CEOs lower salaries or linking their earnings directly to a company’s profit seems to be a sensible solution.
Given the replaceability of CEOs’ performance, cutting their compensation is the most sensible step. Since the salaries offered to CEOs are unreasonably high, companies will benefit significantly from cutting the specified expenses and allocating the resources spent on increasing the extent of CEO’s benefits in a more sensible way. Since a CEO is paid the same regardless of the organization’s actual performance, the selected high pay rates appear unreasonable. Therefore, CEO payment rates must be reduced to minimize expenses and focus on improving corporate performance.
Works Cited
Hoi, Chun Keung Stan, Qiang Wu, and Hao Zhang. “Does social capital mitigate agency problems? Evidence from Chief Executive Officer (CEO) compensation.” Journal of Financial Economics 133.2 (2019): 498-519.
Jihene, Ferchichi, and Dabboussi Moez. “The Moderating Effect of Audit Quality on CEO Compensation and Tax Avoidance: Evidence from Tunisian Context.” International Journal of Economics and Financial Issues, vol. 9, no. 1, 2019, pp. 1-9.