Chief Executive Officer position

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INSTRUCTIONS: I would like you to read and respond to the labeled discussion 1-3. Use outsides citations/sources to help support your argument on whether you agree or disagree with classmates discussions.if you agree why and if not why not. Separate each discussion. Below are RESPONSES OF 3 CLASSMATES. discussion 1 from Aaron:While there has been much debate as to whether executive pay is fair or not, I think that one point that cannot be ignored is the fact that executive pay is greatly disproportionate when compared to the rest of the workforce. Various studies have attempted to show the financial disparities between CEOs and the rest of a company’s employees. One article I found stated that “CEOs at major companies made an average of $17.2 million in compensation, hundreds of times more than the annual average pay of the typical worker. The ratio of CEO-to-worker compensation was 278-to-1 in 2018 — far greater than the 20-to-1 ratio in 1965 and 4.8 times greater than the 58-to-1 ratio in 1989 (1).” Therefore, based on the numbers alone it seems that executive pay is extremely unfair. However, I decided to do some more research to see if there were other reasons as to why the salaries they get paid is unjust. Other investigations have shown that not only is there a large financial disparity between executives and their colleagues, but the study that was discussed in our class’s video this week further highlights some troubling statistics regarding executive pay. The most troubling information that I found was that “companies with CEOs who were paid above the median over the 10-year period significantly underperformed those companies where cumulative CEO summary pay was below their peer group median (2).” Thess findings imply that of the over 400 companies that the study analyzed, CEOs were not only overpaid, but that the company as a whole suffered as a result. In fact, many CEOs actually seem to be preventing company growth rather than aiding it. If this relationship between company performance and CEO pay is true then I would consider the pay scale to be extremely unfair to business owners, investors and employees. That being said, whether a CEO’s large salary is justified or not is highly contingent on what that specific executive brings to the table and how they contribute to the company overall. I do not think it would be fair to state that ALL executives are grossly overpaid and that their salaries are unfair. There are individual companies in which you can see the direct benefit that the CEO plays to the overall success of the company. Examples of this include Amazon’s Jeff Bezos, Tesla’s Elon Musk, and Apple’s original CEO, Steve Jobs. Additionally, Jeff Immelt, who was the former CEO of GE stated that when it comes to highly paid executives, the “good ones [executives] are probably worth more, others are probably worth less (3).” Thus, it seems that if executives really contribute to the overall growth of a company and greatly increase their profitability and success then their pay is fair. I therefore think that when it comes to executive pay, it should be decided on a case by case basis to see whether the compensation is fair or not. Sources: 1) Elkins, Kathleen. “CEOs Made an Average of $924,000 in 1965—Here’s How Much Money They Earn Today.” CNBC, 15 Aug. 2019, https://www.cnbc.com/2019/08/15/how-much-money-ceos-at-big-companies-earn.html. 2) Marshall, R., & Lee, L. E. (2016). Are CEOs paid for performance? Evaluating the effectiveness of equity incentives. New York: MCSI, July. Retrieved from www. msci. com, accessed December, 5, 2016. 3) Scipioni, Jade. “Jeff Immelt, Who Got over $200 Million When He Left GE, on High CEO Salaries: The ‘Good Ones Are Probably Worth More.’” CNBC, 2 Mar. 2021, https://www.cnbc.com/2021/03/02/why-ceos-make-so-much-money.html discussion 2 from Kevin:Do you feel that executive pay is fair or unfair? Explain and make sure you incorporate what you learned from the You Tube video for this week. I personally believe that executive pay is unfair. I believe it is unfair especially when an executive compensation package does not tie into organizational performance. This practice may ultimately deter executives from striving for excellent company performance. The very basis of executive pay contradicts the strategy of performance-based bay. As we have learned successful performance traditionally “triggers merit and incentive awards and the degree of success determines the amount of award” (Martoccio, 2020, Pg.265). For example, why should an executive be generously rewarded for poor performance if we do not reward our non-executive employees on the same basis. As we discovered this week these “instances are often referred to as pay-for-nonperformance or, more harshly, pay-for-failure, and have become increasingly more common events in the world of executive compensation” (Martoccio, 2020, Pg.265). According to the researched provided in the YouTube video higher paid CEO’s who work for larger companies are typically only tenured for 6.6 years. These shorter tenures would suggest that these CEOs tend to only focus on the short-term incentives rather than long-term performance of the organization. These “short-term incentives applied to executives are designed to reward them for meeting intermediate performance criteria” (Martoccio, 2020, Pg.286). Hence why many executives are not striving for excellent long-term performance. The YouTube video suggested the creation of new systems that would directly link executive pay to long-term performance. According to SHRM “executive pay metrics may be starting to shift from a short-term focus on shareholders’ returns to consideration of outcomes such as ensuring “fair” rewards throughout the organization and other factors that can improve the prospects of long-term business success” (SHRM, 2020). If we look at the pay between executives and non-executive employees, well find there is a massive gap between the two. The progressive Economic Policy Institute has “recently released a study that found CEOs in the U.S. earn 320 times as much as a typical worker” (SHRM, 2020). The massive gap between the two has been an arguing point for labor unions around the country. These labor unions consistently “argue that substantial pay discrepancies between CEOs and non-CEOs are socially unjust and promote economic inequality” (Martoccio, 2020, Pg.284). From an organizational perspective if they were unable to match the executive pay of another organization this could cause an inability to attract and retain top talent. The argument from many compensation professionals and board of directors’ members is that “the trends in executive compensation are necessary for attracting and retaining top executives” (Martoccio, 2020, Pg.284). Overall, I believe that organizations must be responsible for ensuring that “compensation is aligned across the organization while always taking fair-pay philosophies, such as determining an employee’s salary based on unbiased attributes like performance history, into account” (SHRM, 2020). At the end of the day, we must ask ourselves could these CEOs be getting paid less and still be high performing executives? Ultimately, I think so and hence why I believe that executive pay is in fact unfair. discussion 3 from Laura: Do you feel that executive pay is fair or unfair? Explain and make sure you incorporate what you learned from the YouTube video this week? I think executive pay, the Chief Executive Officer position, is fair because the work done is “highly complex and unpredictable” (Martocchio, 2020). Executive pay contains core and benefit elements but also executive compensation, which emphasizes long-term rewards (Martocchio, 2020). As noted in the You Tube video, The CEO and Pay Performance, “companies report and measure success by annual reporting cycles, which encourages an obsession with short-term gains as well as average CEO tenure is 6.6 years with can’t have enough incentive to focus on the long-term performance.” CEO is investing more time to produce short-term results versus long-term results. A CEO is always working regardless of day and time and needs to be available to respond quickly to any risk, internally or externally. According to a Harvard study of 300 CEOs, they typically work 62.5 hours per week. The typical workday is 9 to 10 hours days including the weekend to prepare for the upcoming week (Collins, 2019). Furthermore, Professor Howie Baetjer of Townson University, explains “It’s fair and ethical to pay CEOs millions of dollars if they are creating more value for the enterprise than they are paid cause then the enterprise is better off on net and remember enterprise makes goods and services, creating wealth for other people” (Learn Liberty, 2018). Lastly, CEOs have basic skills in running an organization which includes motivating employees, serve as an internal role model, support in defining the culture, understanding internal accounting, presenting budgets and business plans to the board (Cowen, 2019). However, the CEO now has an additional skill set that includes financial market awareness, understanding what market to trade in, public relations, and global mindset and understanding(Cowen, 2019). References Collins, B. (2019, March 14). How To Work Like A Successful Fortune 500 CEO. Retrieved from Forbes: https://www.forbes.com/sites/bryancollinseurope/2019/03/14/how-to-work-like-a-successful-fortune-500-ceo/?sh=5740b2457498 Cowen, T. (2019, April 11). Why CEOs Actually Deserve Their Gazillion-Dollar Salaries. Retrieved from Times: https://time.com/5566816/ceo-pay-income-inequality/ Learn Liberty. (2018, January 29). Is It Unfair to Pay CEOs Billions? Retrieved from YouTube: https://www.bing.com/videos/search?q=are+CEOS+pay+unfair&docid=608036866651215384&mid=1383F9D18670A535ECAE1383F9D18670A535ECAE&view=detail&FORM=VIRE Martocchio, J. J. (2020). Strategic Compensation: A Human Resource Management Approach (10th ed.). Pearson. The Unfair Files: CEO Pay and Performance HowStuffWorks Now. (201agn6, July 29). Retrieved from YouTube: https://www.youtube.com/watch?v=NNlmnHdF94A