Human Capital & Careers

Square-Off: Is Executive Pay Too Low, Too High, or Just Right?

Here are four fresh takes in the ceaseless debate over compensation for CEOs and CFOs.
David McCannApril 18, 2017
Square-Off: Is Executive Pay Too Low, Too High, or Just Right?

It probably won’t ever be possible to resolve the societal debate over the proper amount of compensation that should rightly be awarded to top corporate executives. It may be no more achievable than national consensus on how to approach health care, taxes, or gender and racial equality.

People in business, though, generally take it for granted that the apt amount to pay CEOs and CFOs is best left in the hands of the company’s board of directors. Among the 20 or so folks who responded to our call to contribute to this forum — admittedly, an unscientifically assembled group — only one pitched an essay decrying high executive pay.

But there are legitimate questions. If top executives were paid half as much as they are, would companies come to harm? Would driven leaders possessing vision, knowledge, talent, and wisdom still want those jobs? Would investor behavior be any different? How about employee engagement?

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There may indeed be an objective, optimal amount to pay each individual executive, given all the variables in play — company size and industry, company performance, peer-group compensation, and the executive’s track record and abilities, for example. But confidently identifying that optimal amount is such a complex task that few boards of publicly held companies attempt it without enlisting the services of a compensation consultant. And even so, who’s to say that the consultants’ recommendations are free of bias or based on the most relevant assumptions?

This package of opinion articles suggests numerous talking points for use in discussions on executive pay. As you absorb each one, think about whether the expressed logic is sound or assailable. Enjoy!