In most cases, chief executives or CEOs are overpaid to increase the competitiveness of the firm, to guarantee high profits, and offer decisions based on the unique experience and education. To provide stockholders with adequate premiums, companies need to pay CEOs and expect the implementation of the most effective strategic decisions. However, even though CEOs are responsible for making decisions, analyzing the situation, developing the company, monitoring the financial operations, and negotiating with partners, their wages are extremely high while comparing them to the compensations received by managers or employees.
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According to the data provided by the Bureau of Labor Statistics of the U.S. Department of Labor, the CEOs’ median wage was about $102,000 per year in 2015 (U.S. Department of Labor, 2015). Still, the Occupational Information Network provides the higher numbers, and it is stated in the data that CEOs receive about $175,000 annually (O*NET, 2015). From this perspective, CEOs can be regarded as overpaid since the outcomes of their activities are not correlated with the costs for the company in the context of supporting other human resources.
Therefore, it is unethical to focus on downsizing in those situations when staff shortages are necessary, but CEOs’ benefits continue to increase. From this point, there is a situation when a company needs to adjust to the external economic factors and lay off employees, but it unreasonably preserves the high wage and bonuses for CEOs.
It is possible to state that the contribution of CEOs cannot be covered by the costs of firing employees and providing higher bonuses to overcome the problematic situation in the company. The approach of increasing CEOs’ wages during periods of crises or recessions is even more unethical while comparing it to the procedure of downsizing. Therefore, the reasons to provide CEOs with extremely high benefits seem to be unclear in many cases, and such strategies can become failures.
Furthermore, it is also important to note that the high compensation and benefits proposed to CEOs do not guarantee that they will be able to improve the business’s performance. The problem is in the fact that the performance of the company depends on a variety of factors, and effective leadership is only one of these factors. Even though much attention should be paid to organizing the operations and making strategic decisions, many responsibilities associated with the management and administration of processes are addressed by managers whose wages are significantly lower than the compensations of CEOs. As a result, the constant increases in CEOs’ wages can be discussed as factors or motivators to influence the company’s performance.
U.S. Department of Labor. (2015). Bureau of Labor Statistics: Top executives. Web.