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Case Study on American CEO Pay: The Debate over CEO Compensation

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Read "Case Study: The Debate over CEO Compensation." Do you think the fact that most American CEOs are paid so much more than rank-and-file employees suggests CEOs are overpaid? Explain.

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Solution Summary

This solution discusses the pros and cons of CEO compensation in 396 words.

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It depends.

For the companies who are doing well, it does make sense to pay the CEO a significant amount of money even if it is much more than employees for a couple of reasons:

1. The value of the firm depends on the decisions of the CEO- whether those employees have a job or not is dependent on the CEO and every other decision is dependent on that person as well. In theory, if the CEO is doing his job, he is doing a lot of work and needs to be paid accordingly.

2. Being the CEO is very risky and ...

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