Executive Compensation - How much is too Much Research Paper

Executive Compensation - How much is too Much - Research Paper Example The debate about high executive compensation has been in the spotlight in United States since industrial revolution. However, it was during the great depression that this news and discussion made the headlines. Since then, this debate has always received widespread during all economic recessions. Following the pattern, as the financial crunch and economic recession hit the United States in 2006-07, this debate again reached its peak because the masses started questioning the perceived wide gap between the salaries of an average employee and the executives. Critics of high compensation believe that this is one of prime reasons of increasing inefficiencies, recession, and increasing income inequality in United States. On the other hand, proponents of high compensation believe that these pay levels are a result of market and competitive forces and external forces such as the government, watchdogs and others should have no right to interfere in how much the boards of willing to pay their executives. The thesis statement around which this paper that revolve is that â€Å"executives pay is sky rocketing and there is no rational and logical thought to allow these pay levels to increase further if we want a way out of this recession and prevent future recessions† (Mishra, McConaughy & Gobeli, 2000). ... They compare the pay of CEOs with investment bankers, hedge fund managers, equity investors, lawyers, and others. Since 1990s, there has been steady increase in the salaries of above-mentioned professionals but the pays of CEOs and other executives has not risen with the same percentage. Furthermore, out of the top 0.1 percent people in the United States arranged according to the gross income, only 3 percent of them were CEOs and executives of companies. Furthermore, in the year 2007, â€Å"top 20 hedge fund manager bagged more than three times the pay earned by the salaries of all S&P 500 combined† (Hayes & Schaefer, 2009). Proponents of this school of thought strongly believe that companies will have to take bold steps in order to retain their executives because many smart CEOs have already started shifting to Wall Street to take positions at private equity firms (Hayes & Schaefer, 2009). In order to defend the position of CEOs being overpaid, other experts have gone on to a ccept that executives and specifically, CEOs are overpaid but it is not because of the work that they do but because their job is to inspire people. The reason behind providing CEOs with the fattest checks is to ensure that it keeps other people in the company motivated (Kay & Putten, 2007). Everyone dreams to become a CEO or an executive some day and people dream about the same because they know the compensation levels. People look at executives, their cars, houses, clubs, salaries, benefits, lifestyles and that is what keeps them motivated to stay with a company and put in their best effort into their jobs hoping that within a decade or so, they would also be able to reach that dream position. Economists call this, as