Popular press and media accounts generally suggest that executives are overpaid. For example: the average yearly salary of a CEO of Fortune 500 company in 2018 was $14.5 million. The average yearly salary of a regular worker was $39,888.
- Justify why the CEO’s pay is appropriate.
- Support your response with specifics.
Requirements: two paragraphs
Answer preview
Basically, the company board of directors selects and recruits the CEO. More importantly, the board is involved in setting the salary for the CEO where they determine the base pay through conducting a survey for job executives from comparably sized companies or from rival firms in the same industry (Potts, 2006). Based on the information they have collected; the board chooses the compensation structure or base income that is below or above the average rate for executives at the same level. Also, the board also provides an annual bonus to the executives, which is mainly intended to motivate them to perform better. It is mostly tied to the firm’s annual target (Martocchio, 2004). The executive pay is justified because the board prefers hiring experienced, educated, and successful executives. To get such an executive, the board must be willing to pay higher salaries. The compensation commensurate with the skills and experience that the CEO possesses. The company’s board budget a lot of money to invest in a talented CEO who would intern help the shareholders generate more profits.
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