The rapid rise in CEO’s compensation over the last several decades has sparked conversations about the nature of how a company sets the rate of formulating the compensation pay. Executive compensation has been in the news for the past several years as part of an ongoing discussion of income inequality. Many executives view the high levels of CEO’s pay as a result of competitive market for qualified managerial talent and improved levels of company performance and higher stock prices. Unfortunately, the general public view the high level of CEO compensation due to powerful managers setting the highest levels they can extract from a company. Corporate executives have been receiving enormous compensation packages specifically in the form of bonuses …show more content…
But, what happens to CEO’s when their goals are not specifically set by the board of directors or administration, it is difficult to put specific blame on administration or management as to what achievement was not produced and how this will reflect on a compensation package. Let us look at an ideal setting where the goals set are not multiple or overtly complicated, or even unattainable; what hardship must a CEO endure for such actions. “It wasn’t always this way. In 1978, CEOs earned 30 times the take of the average employee; now, according to the Economic Policy Institute, they get 276 times as much. These numbers betray an attitudinal upheaval. Time past, a CEO’s pay was set on a scale with others in the same organization. This was dubbed “internal equity.” But in the 1980s, a consultant named Milton Rock sold the idea of “external equity.” Now, as if CEOs belong to a tribe of super-human, they are paid on a scale with only their peer CEOs.” (Lowenstein, R., 2017, …show more content…
This system helped ensure executives received large cash bonuses and stock options. Their compulsive focus on driving up market shares to earn bonuses covered the lack of basic control of the company. The unethical behavior, cooking of the books, and stakeholder manipulation showed Enron's lack of corporate governance. This led to the creation of stronger internal control policies and consideration if the board of directors should be more independent from company