Discuss three possible explanations for extremely high levels of CEO compensation.
What will be an ideal response?
One approach to explaining why executives receive such large sums of money involves social comparisons. In this view, executive salaries bear a consistent relative relationship to the compensation of lower-level employees. When salaries of lower-level employees rise in response to market forces, top executive salaries also rise to maintain the same relative relationship. A second approach to understanding executive compensation focuses less on the difference in wages between executive and other jobs, and more on explaining the level of executive wages. The premise in this economic approach is that the worth of a CEO should correspond closely to some measure of company success, such as profitability or sales. A third view of CEO salaries, based on agency theory, incorporates the political motivations that are an inevitable part of the corporate world. Sometimes, this argument runs, CEOs make decisions that aren't in the economic best interest of the firm and its shareholders. One variant of this view suggests that the normal behaviour of a CEO is self-protective-CEOs make decisions to solidify their position and to maximize the rewards they personally receive.
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What will be an ideal response?
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What will be an ideal response?
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What will be an ideal response?