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CEO Salaries and Company's Success

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Do you think there is a correlation between CEO salaries and the degree of success of a company? If you were to take a sample of companies with comparable size, market capitalization, and product category, and plot CEO salaries against the net profit of their respective companies, do you expect to find a linear correlation between the two? Explain.

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Solution Summary

The solution discusses the correlation between CEO's salaries and the success of companies. It showed that there is a positive and significant relationship between total CEO pay and firm performance.

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Definitely, linear correlation exists between CEO salaries and the degree of success of a company. Common sense dictates that when an employee is given a high salary, that employee is encouraged to do his/her best to make the company succeed. The employee knows that this level of salary will only continue if the company's operation is ...

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