US CEO's

Subject:  Are US CEOs overpaid?

         A Chief Executive Officer (CEO) “is the highest ranking executive in a company…[who] manages the overall operations and resources of a company…acts as the main point of communication between the board of directors and the corporate operations” (A).  While a plethora of US companies are underperforming, it appears that the CEOs are continuing to receive inflated salaries and generous bonuses.  When analyzing the performance of organizations in the United States and when broadening our scope to the salary of the worldwide CEO, it is becoming increasingly more difficult to defend that the US CEO is solely responsible or entitled to the wealth he/she receives.

             There is quite a difference between and individual who merely runs a company and an individual who built his/her company from the ground up.  Ralph Lauren is a visionary who took his ideas and transformed them into a multi million- dollar organization.    Lauren believes that “it is not a race for what is next, rather, an appreciation of what has come before”, (B) instead of constantly looking ahead and wanting more he takes time to honor his predecessors and learn about what he needs to do to take the next step in his company.  His $66.7 million salary is well deserved due to his passion and dedication to the fashion industry and the 24,000 workers he employs worldwide (C).   Also, Oracle CEO Larry Ellison and Viacom CEO Philippe Dauman both earn over $30 million a year but shares in both companies have increased by over 60% in the last five years under the command of these gentleman (D).  The CEO deserves to be rewarded for the success of his/her company.

         When comparing the salaries and packages of the US CEO with those in other countries and evaluating who actually owns the organization, the wages of US CEOs do not seem just.  When Japan disclosed the average CEO salary for companies listed on their stock exchange in 2009, including bonuses, the total averaged $580,000, “about 16 times more than the typical Japanese worker” (E).  The average US CEO in 2009 made $3.5 million dollars, “319 times as much as the average American worker” (E).  There is no excuse for a margin this large.  Also, in 2011 the top US CEOs “got a collective pay raise of 16%” compared to “a 3% pay raise to the average American worker” (F). 

         An agreement of some sort is not only desperately needed but is essential if we want to please both the CEO and the average working class American.  Therefore, a binding say on pay mandate will be crucial to the issue at hand.  In the United States, shareholders have a non-binding vote on executive compensation.  Seeing as the board of directors is closely affiliated with the CEO, if the CEO demands a higher salary or greater bonuses, a non-binding mandate will hold little to no weight.  In Australia, under a 2011 Amendment to the Corporations act of 2001, “if at two meetings over 25% of shareholders vote against the directors’ remuneration package, …the company must convene a general meeting within 90 days in which all the directors in office at the time must stand down, but may stand for re-election” (G).  A mandate like this can definitely gain agreement from parties on both sides of the argument.  For one, working class Americans can feel more empowered because they now have an actual say in who stays in office and how much compensation he/she really deserves.  On the other hand, CEOs will benefit because they have clearer obligations; continuously increase the value of the company and please the shareholders, this will ensure their spot in the organization and certainly entitle a pay raise.       

Works Cited

(A)"Chief Executive Officer - CEO." Chief Executive Officer (CEO) Definition. N.p., n.d. Web. 11 Feb. 2013. <http://www.investopedia.com/terms/c/ceo.asp>.

(B) "Billionaire from the Bronx: How Ralph Lauren Achieved Success."EvanCarmichael.com. N.p., n.d. Web. 08 Feb. 2013. <http://www.evancarmichael.com/Famous-Entrepreneurs/1895/Billionaire-from-the-Bronx-How-Ralph-Lauren-Achieved-Success.html>.

(C) Helman, Christopher. "Why America's Highest Paid CEOs Are Insanely Overpaid."Forbes. Forbes Magazine, 25 Oct. 2011. Web. 08 Feb. 2013. <http://www.forbes.com/sites/christopherhelman/2011/10/25/why-americas-highest-paid-ceos-are-insanely-overpaid/>.

(D) "What Americas Best-Paid CEOs Have In Common: The Exit Door." Corporate Intelligence RSS. N.p., n.d. Web. 09 Feb. 2013. <http://blogs.wsj.com/corporate-intelligence/2013/01/30/what-americas-best-paid-ceos-have-in-common-the-exit-door/>.

(E) "Average Japanese CEO Earns One-Sixth As Much As American CEOs."ThinkProgress RSS. N.p., n.d. Web. 09 Feb. 2013. <http://thinkprogress.org/politics/2010/07/08/106536/japanese-ceo-american-sixth/?mobile=nc>.

(F) DeCarlo, Scott. "America's Highest Paid CEOs." Forbes. Forbes Magazine, 04 Apr. 2012. Web. 10 Feb. 2013. <http://www.forbes.com/sites/scottdecarlo/2012/04/04/americas-highest-paid-ceos/>.

(G) Mallessons Stephen Jaques. Directions 2012. Mallesons. Mallessons Stephen Jaques, n.d. Web. <http://www.mallesons.com/Documents/Directions_2012.pdf>.