Enormouse Wealth of CEOs - 1194 Words

Let me start off by saying 2.27 billion. What does that make you think of? Some of you may think it is the population of a specific continent? Others may think it is the amount of petroleum being drilled for. I am sure none of you would have guessed it was the amount of money Mark Zuckerburg, the creator of Facebook, made in one year. Executive compensation is bonuses and benefits given to CEO’s of companies on top of the base salary they are receiving. The amount, as you see, can be astronomical which will lead one to question the ethics of employee compensation programs. While it may motivate some people to perform better so they may increase stockholders wealth, it may also have an adverse effect on the executive which will have an effect on the entire company as was the case with Enron. I am taking up Business Economics and Research has led me to the conclusion that employee compensation is unethical, detrimental to the health of companies, and disadvantageous to the entir e economy. Executive compensation is a form of financial compensation that is determined by the compensation committee. The compensation committee sets the package so it correlates with factors that have an effect on the company. According to an economic theory known as the â€Å"Optimal Contracting Theory.†, top executives and shareholders negotiate through the board of directors to maximize their respective interests (Managerial). A principal/agent problem arises because shareholders need to get the