How can lofty executive compensation serve corporate interests?
What will be an ideal response?
In theory, lofty compensation packages are thought to serve corporate interests in two ways. They provide an incentive for executive performance (a consequentialist justification), and they serve as rewards for accomplishments (a deontological justification). In terms of ethical theory, they have a utilitarian function when they act as incentives for executives to produce greater overall results, and they are a matter of ethical principle when they compensate individuals on the basis of what they have earned and deserve.
In practice, reasonable doubts exist about both of these rationales. There is much less correlation between pay and performance than one would expect. At least in terms of stock performance, executives seem to reap large rewards regardless of business success. Of course, it might be argued that in difficult financial times, an executive faces greater challenges and therefore perhaps deserves his salary more than in good times.
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