US CEO's pay Essay Example | Topics and Well Written Essays - 1000 words

US CEO's pay - Essay Example Since the mid-1970’s, for roughly 40 years, the pay of top executives rose at a modest rate. However, executive compensation started shooting up tremendously in 1980 and this pace even accelerated in 1990’s. Notwithstanding dipping in the stock in the early 2000’s, the CEO’s, the CEO’s package has continued shooting higher. An average CEO of a large company in the US earned around 24 times the compensation of a typical worker. (Jacob and Paul, 2010) In the mid-1980’s, at the time of the economic boom, US executives were being paid the most lucrative salaries in history and this continued even during recession in 1990’s. This was perceived as unfair to both laid off employees and stockholders. (www.findarticles.com) Up to 2003, the American Chief Executives average compensation rose by a factor of about six in America’s top five hundred companies. Their average pay reached around eleven million per year inclusive of the value of the options. This is not comparable to CEO’s pay in any country. For example, Swedish Chief Executives received roughly a quarter of their American counter parts. In 2007, the CEO’s pay accelerated towards three hundred times that of a typical worker. Executives of top companies made more than twelve million US dollar in that year. (Tyler, 2006) Scholars Xavier Gabaix of Massachussetts University and Augistin Landier of the stern school of business argue that American executives are not overpaid. They suggest that increase in the value of stock market largely explains the high packages of Chief Executive officers. This argument is simple. It suggests that more economic value is created by better executive decisions. If the number of good executives is less than the number of big companies, the value of the executive talent will be pushed up by competitive bidding. Thus, the value of Chief executive officers compensation packages results from competitive