CEO Bucks the Trend

A Point of View in our local paper talks about executive pay and how, perhaps in some cases, high profile CEOs may actually be worth the big bucks they get.

In executive pay, you get what you pay for

Peter A. Coclanis - CHAPEL HILL, NC


"[N]umerous empirical studies have shown that most executives have earned big bucks in recent decades because the share prices of their companies have risen dramatically. In the vast majority of cases, prices rose not through corporate abuses, cooking of the books or financial chicanery, but at least in part because the possibility of high compensation motivated very talented people at the margin to assume top-management positions at a risky time, and because these people, generally speaking, managed in such a way as to add tremendous value to shareholders, much more value than top managers themselves received in compensation.

"In other words, top execs did good for themselves by doing well for those for whom they worked."

Basically what the article is saying is that sometimes the reason executive compensation seems excessive is because their "pay" is based largely on company stock. The greater the value of the stock, (presumably thanks to their hard work,) the greater the value of their take home pay.

It's the trend to complain about how high some CEO's salaries appear. But let's take a hard look at whether they worked to earn it by helping all shareholders of that company in the process.
.