One of my fellow classmates, Zilue, has posted a blog regarding a popular business ethic problem–are CEOs paid too much? Recently this debate was also brought up in my Comm 292 course as we studied the chapter on motivation among organizational behaviors.
Zilue argues that excessive executive compensation causes “harm to the corporation in the long run by cultivating a culture that is driven solely by numbers.” Some of his arguments include the questionable performance of the CEO, the arousal of dissatisfaction among employees and the shareholders.
I would take a different side from Zilue. During an interview, Pfzer’s Hank McKinnell admits that the CEOs are being paid very well, but since “nobody has any idea what the right level should be,” such debates should be minimized to prevent any government intervention in the market. A CEO is responsible for setting direction of operation for the corporation. Theoretically, as a result, money acts as an extrinsic value to retain the CEOs’ high level of loyalty and motivation. Just like the saying “all that glitters is not gold, but gold will glitter forever,” it is not difficult for a CEO with high level of self-efficacy to play job-hopping and serve for another more competitive company. Rather than discouraging the employees with the income gap, CEOs compensation should act as an incentive for the employees to strive better. Last but not least, what would the shareholders of a corporation think if the CEO’s compensation is suddenly halved? They are likely to loose confident in that company and ultimately result in a devastating fall in stock price.
Links from Zilue’s blog:
http://money.cnn.com/magazines/fortune/fortune_archive/2006/07/10/8380799/
Book:
ORGANIZATIONAL BEHAVIOUR CDN 5/E