Termpaper - Nicole Dzenis May 2, 2009 Econ 367.02 Term...

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Nicole Dzenis May 2, 2009 Econ 367.02 Term Paper Final CEO’s Deserve High Compensation In the current economic decline it is no surprise that the power of Chief Executive Officers and their effect on the affairs of their corporations has recently been the focal point of the American mass media. The burden of the success of the firm rests solely on the shoulders of the CEO. A CEO oversees how all the business functions such as marketing, finance, accounting, human resources, and even logistics interact. Furthermore, the CEO interacts with a company’s board of directors and shareholders to discern what the best course of action is to maximize shareholder wealth. They steer the company accordingly by setting budget, form partnerships, and hire a of team employees to excel and drive their corporation to success. A CEO with a plethora of business acumen can create a corporate culture where the best talent is motivated to stay with the company. Through interacting with all the different business functions, the CEO ensures maximum efficiency and hopefully profitability for the firm. The chief executive officer possesses a variety of skills and takes on the vast majority of accountability for the success or failure of the firm. Because of these factors CEOs deserve a pay scale that is on par with the risk that the CEOs are forced to shoulder. It is no surprise that the media decides to ignore solid research about the correlation on CEO compensation and their company’s success. Ira T. Kay, author of the article “Don’t Mess with CEO Pay” states that “properly designed pay opportunities drive superior corporate performance and secure it for the future” (Bonello and Lobo). It is essential to have high executive
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compensation because it is a significant source of competitive advantage for business entities, driving higher productivity, profits and stock prices. In today’s society the American media presents an incredibly skewed view on CEO salaries. The media vilifies CEOs of companies that ultimately fail or operate at a net loss. The American media, most of which have a lack of business acumen, often cite the CEOs salary as a factor in the firm’s failure. The media’s reports on Enron, Tyco, Adelphia, and WorldCom stress that CEOs are paid too much and they do not deserve the pay they receive. The media aggressively pushes these stories because the American public is attracted to the negativity surrounding CEO compensation. The American media does not report on the CEOs that maximize shareholder wealth and are effectively compensated by the company’s shareholders. Press accounts continue to ignore the solid research that bolsters the arguments surrounding CEO compensation and firm performance. Research done by Ira T. Kay has shown her “never witnessed board members straining to find a way to pay an executive more than he is worth”. Each year companies file their annual reports and the public expects stories purporting on just how much America’s top executives are being paid. The media stretches the truth and
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This note was uploaded on 06/09/2009 for the course ECON 367 taught by Professor Molly during the Spring '09 term at Ohio State.

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Termpaper - Nicole Dzenis May 2, 2009 Econ 367.02 Term...

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