TS ISSUE #11
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Ira Kay states that in general the pay of CEO are paid to do what?
Bring the price of stock up to increas shareholder wealth.
Why has CEO pay risen enormousley over the past two decades?
In large part becasue the shareholders wish to reward company leaders for the increase int he stock price
What happened to CEO compensation in 2000 when investors lost 12% of their portfolio value?
CEO's received an average 22% raise in salary
What is the reason that corporations are set up as a private enterprise and what role does that state play?
It is a voluntary contract among investors to increase their wealth by legal means, but is charted and protested byt he state, in the service of the state's long-term interest in thriving economy.
What has been the result of the public's perception that executive compensation is lavish?
Political pressure by some for greater shareholder or government control over executive compensation
According to Kay, what does solid research show regarding CEO compensation?
That annual pay for most executive moves up and down significantly with the company's performance both financial and stock related
Who are some groups critical of CEO compensation?
The California PUblic Employees' Retirement System and the AFL-CIO
What is the key question to ask concerning CEO pay according to Kay?
Whether that CEO creates an adequate return on the company's investment (ROI) in executive compensation
What are the findings produced by empirical evidence gathered by KAy over that past 15 years concerning pay?
a) Executive pay is high compared to low-level corporate positions and it has risen dramatically faster than inflation and faster than the average employees pay. But pay ususally tracks total returns to shareholders
b) Executive stock ownership has risen dramatically and high CEO stock ownership are correlated with and most likely cause of companies' high financial and stock performance
c) Executives are paid commensurate with the skills and talents they bring to the organization and underperforming executives are routinely receive pat reductions or are terminated
d) CEOs who are recruited from outside a company and have little influence over its board recieve compensation that is competitive with and often higher than pay levels of CEOs promoted from within
e) At the vast majority of companies even extraordinarily high levels of CEO compensation represent a tiny fraction of the total value created by the corporation under that CEO's leadership
According to Kay, the genral rise in income inequality has reulted in what?
CEOs have now become easy targets for social critics
How is the relative scarcity of CEO talent manifested?
The renetic behavior of boards charged with filling the top position when a CEO retires or departs. THet legimate market driven bargaining power of CEO candidates in pay negotioations to obtain pay commensrate with their skills
Why do boards provide CEO's with severance agreements as part of thier compensation package?
Top executive talent expects and can command financial protections commensurate with the level of risk they assume, and boards should have these agreements as part of the package they create to attract and retian talent.
What do many economists argue about the US model of executive compensation?
It si a significant source od comparative advantage for the nation's economy driving higher productivity, profits, and stock prices
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