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    American Capitalism and Business Ethics

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    American Capitalism: Is a large discrepancy between executive pay and that of the average worker unfair to the worker? Is it unfair to increase a CEO's compensation at the same time that he or she downsizes the workforce? What is an ethically justifiable way to determine the pay of a CEO of a large corporation? How do you explain that?

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    Solution Preview

    There are a lot of factors that have to be taken into consideration with executive compensation issues. First of all, we can't justify paying a CEO just a few dollars above what we pay a worker. The CEO must be the highest paid official in the company. The other workers and positions work up to the pay level that the CEO has, when the worker becomes CEO (if that is their goal). The CEO has to have the highest pay, which sets the pay ceiling for the company. The CEO essentially bears the weight of the company's success, or lack of success, which is one of the reasons why CEO compensation is high. In addition, most CEOs, and all CEOs of large companies, have been through extensive education, training, and have developed the skill set that we see in CEOs. When we set CEO compensation, we're ideally setting it at a level that matches the level of academic experience and training necessary to become a CEO. Let's look at a CPA, as ...

    Solution Summary

    This solution discusses ethically justifiable ways to determine the pay of a CEO for a large corporation. I also discuss if the discrepancy in pay based on position is ethical and issues related to CEO compensation.