CEO COMPENSATION Essay

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Is CEO Compensation Justified by Performance? The salaries of CEO’s today are very high compared to what it was back in the day. In economic booms, the salaries of CEO’s have skyrocketed and when the economy goes down the salaries of the CEO’s attracts the public’s attention. CEO pay is a controversial issue in the Unite States especially after the Financial Crisis of 2008. CEO’s are definitely getting paid too much for various reasons stated by former CEO Edgar Woodard Jr. There are four myths about CEO pay according to Woolard. The first myth is CEO pay is driven by competition. The second myth is about compensation committees are independent. The third myth is about how much wealth CEO’s are creating. The fourth and final myth is about severance for failing. According to Woolard, CEO pay is not driven by competition. The pay of today’s CEO is driven by outside consultant surveys and board member buying into a concept. The concept that the board members are buying into is that the CEO of your company has to be paid in the top half. Woolard suggests that in order to solve this problem is for the board members to suggest the human resources and compensation people to look at the internal pay equity and make the decision of what to do regarding the situation of the internal pay equity. Woolard thinks that the compensation committees haven’t been independent for the last fifteen years. Compensation committee’s would have consultants that would have surveys to support paying anything you want to pay. The consultant would then to talk to human resource vice president that talks to the CEO

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