Chapter 6, Problem 1EA

Are top executives paid too much? A study of CEO compensation revealed that CEO bonuses nose considerably—from 20 percent to 30 percent—even at companies whose revenues or profits dropped or those that reported significant employee layoffs. Such high for CEOs at underperforming companies. as well as CEO compensation at companies with stellar results, has raised many questions from investors and others. The highest gap in pay was in 2000. CEO pay at the largest U.S. firms was 376 times higher than that of average workers. The gap has shrunk to only 271 times higher in 2016, but that is still a lot higher than the 59-to-l ratio in 1989. The Securities and Exchange Commission (SEC) now requires public companies to disclose full details of executive compensation, including salaries, bonuses, pensions, benefits, stock options, and severance and retirement packages.

Even some CEOs question the high levels of CEO pay. Edgar Woolard, Jr. former CEO and chairman of DuPont, thinks so. "CEO pay is driven today primarily by outside consultant surveys," he says. Companies all want their

Summary Introduction

To discuss:

Whether increasing the compensation of the CEO at the time of organization's financial crisis is ethical.

Introduction:

Financial crisis can arise at any time, and the managers, CEOs and other senior officials must be ready for every situation. The job of a CEO, manager or any other senior official is very challenging, because they are the policy makers of the company, and if any financial crisis arises, they are answerable.

Explanation of Solution

Yes, it is true that the CEO and managers are paid high as compared to other employees, but other employees are not answerable to anyone during financial crises. CEOs and managers are those who are responsible to carry the company on the top and save the company from crises. Hence, it is ethical to compensate them more.

Sometimes they might fail in their work, but they try their best to keep the companysafe. No manager or CEO can take out the company from every tough situation every time, but it is their responsibility to hire the best employees, who can help them to resolvethe problems.A manager should be capable of analyzing every situation correctly, and create a good team to reduce the problems. Securities and Exchange Commission (SEC)helps to disclose the executive's compensation publicly. Following the SEC mandates, all the companies disclose about the compensation matters.Hence, disclosing compensations of senior officials is also ethical.