Executive Compensation A Pay Ratio Rule - 1083 Words

CEO’s Compensation Nola Ward Independence University Introduction More than five years ago the Securities and Exchange Commission was told to issue a pay ratio rule that companies that are public must disclose how their median worker’s pay compares to their chief executive officers pay. Liberal advocacy groups and unions like the pay-ratio rule when corporations dislike it; because of the point of public shaming. CEO’s will look greedy and graspy when the world know that they make hundreds of times more than their median level employees, which in turn the corporate boards may be forced to cut the bosses pay and raise the workers. It makes sense to focus on how CEO’s pay is determined instead of obsessing on how much they earn.†¦show more content†¦Because of their compensation sets the pattern the criticism particularly focus on the CEO’s high pay as well. Just like the previous criticism, there are current complaints which focused on at least two issues: Executives are paid too much and becaus e the connection between executives current incentive-pay schemes are flawed. Because of these issues the company performance at best is mixed and at worst has led to a series of dysfunctional behaviors (Lorsch Khurana, 2010). As the pay gap between chief executive officers and American workers of public companies grow; the question has aroused as to what drives the pay of the CEO’s and what’s behind the disparity. It is a known fact that it is a big disparity between the pay of other worker and the CEO pay in corporate America but what is the reason this disparity exists? The first major justification is an incentive for performance that is put forth by corporations; this helps explains the CEO pay level. They thought in order to attract the right candidate who will impact the performance of the organization is that they have to pay big. If this happens the shareholders of the company can get a better return on their investments. What has been justified as comp ensation for executives is to provide them with some form of stock grants as a form of incentive with