Do CEOs Get Paid Too Much?

11 April 2008

Barack Obama announced today that he wants shareholders to be heard when it comes to executive Stack_of_money_3compensation.

During periods of economic turmoil and downward moving stock prices we always see executive compensation come to the forefront as a topic.

When a company’s stock goes up, nobody complains about executive compensation.  When a stock goes down, everything is up for scrutiny (executive compensation, company strategy, financial discipline, product/service offering, etc.).

So, is it fair to pick on the CEO and the size of his/her compensation package during tough times?  Perhaps the better question is – who decides the CEO’s compensation? 

The answer is clearly the Board of Directors.  In my opinion there are two levels of accountability when it comes to executive compensation:
1) The CEO – being a CEO is high risk, high reward proposition.  If you do well, you do very well.  If you do poorly, you’re out (few questions asked).
2) The Board of Directors (more specifically the Compensation Committee) – it is the Board’s responsibility to represent the shareholders, ensure that a CEO is held accountable, and ensure that a CEO is compensated appropriately.

As opposed to getting all shareholders involved in a debate on executive compensation let’s look towards the Board of Directors to be more accountable in managing the CEO.

After all, if shareholders don’t like the job that the Board is doing, the mechanisms are already in place to vote them out.

One Response to “Do CEOs Get Paid Too Much?”

  1. ceos are being paid to much

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