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Politics : Formerly About Advanced Micro Devices
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To: tejek who wrote (322611)1/24/2007 10:34:02 AM
From: TimF  Read Replies (1) of 1574978
 
If offering a lot to a CEO increases the profitability of a very large company by a noticeable amount it wouldn't be unreasonable to pay the CEO 1000 times what the average worker makes. The problem for CEOs using that argument to defend their high pay is that many highly paid CEOs really aren't all that good.

The pay of CEOs (and other top executives) may be inflated because its determined by boards that are made up (to a large extent) of executives, both executives from the company in question, and executives in other companies who are reluctant to push down the going price for executive compensation. To the extent that is true it can be considered a case of the principal-agent problem. Its the shareholder's company, but the shareholders don't often make decisions except to buy or sell.
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