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Compensation of CEO's of large companies

Why are CEO's of the world's biggest companies being paid such large sums of money? Is this just compensation for an enormously difficult task or does the logic of rewards seem distorted? Discuss the argument that performance should be linked to pay - your discussion should include references to stock-option schemes, bonuses and rise in stock prices apart from salaries?

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This is the issue related to the Labour Market

There are three main groups of actors or participants in the labour market: individuals, firms (or employers), and the government

Individuals make labour market decisions concerning:

? whether and when to enter the labour force,
? how much education, training and job search to undertake,
? what type of work (which occupation and industry),
? how many hours to work each week (and weeks per year),
? what wage, or wage increase, to demand,
? whether to quit one's current job and look for another job, possibly in another region, industry, or occupation,
? whether to join a union or employee association,
? when to retire

Firms make labour market decisions concerning:

? how many workers to hire and how many hours of work to require,
? what type of worker to hire (what skills are required)
? what wages and fringe benefits to pay,
? when to lay-off employees and perhaps close a plant,
? what type of work can be subcontracted out,
? how to design an effective pension and retirement policy

Governments set various policies that have direct implications for the labour market decisions of individuals and firms:

? human rights and anti-discrimination laws
? employment standards and laws concerning minimum wages, hours of work and overtime, maternity and paternity leave,
? occupational health and safety laws, and workers compensation
? providing subsidized university/college tuition and public training programs
? labour relations laws regulating the collective bargaining process
? (un)employment insurance and income maintenance (social assistance) policies
? public pensions
? providing jobs in the public sector

The wage rate is determined by equilibrium of labour supply and labour demand
There are many dimensions to labour supply, including demographics (the effects of a baby boom), immigration and emigration policies (perhaps a brain drain?), the labour force participation decision, the hours of work decision (including overtime and moonlighting), education and training (human capital decisions), and the disincentive effects of income maintenance and unemployment insurance policies

Labour ...

Solution Summary

This explains the compensation of CEO's of large companies