Hostname: page-component-76fb5796d-dfsvx Total loading time: 0 Render date: 2024-04-28T14:09:33.158Z Has data issue: false hasContentIssue false
  • English
  • Français

Do CEOS get Paid too much?

Published online by Cambridge University Press:  23 January 2015

Jeffrey Moriarty
Get access Rights & Permissions [Opens in a new window]

Abstract:

In 2003, CEOs of the 365 largest U.S. corporations were paid on average $8 million, 301 times as much as factory workers. This paper asks whether CEOs get paid too much. Appealing to widely recognized moral values, I distinguish three views of justice in wages: the agreement view, the desert view, and the utility view. I argue that, no matter which view is correct, CEOs get paid too much. I conclude by offering two ways CEO pay might be reduced.

Type
Articles
Information
Business Ethics Quarterly , Volume 15 , Issue 2 , April 2005 , pp. 257 - 281
Copyright
Copyright © Society for Business Ethics 2005

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abowd, J. M. 1990. “Does Performance-Based Compensation Affect Corporate Performance?” Industrial and Labor Relations Review 43: 52S–73S.Google Scholar
Abowd, J. M., and Kaplan, D. S.. 1999. “Executive Compensation: Six Questions That Need Answering.” Journal of Economic Perspectives 13: 145–68.Google Scholar
Anderson, E. 1999. “What is the Point of Equality?” Ethics 109: 287–337.Google Scholar
Annis, D. B., and Annis, L. F.. 1986. “Merit Pay, Utilitarianism, and Desert.” Journal of Applied Philosophy 3: 33–41.Google Scholar
Baker, G. P., Jensen, M. C., and Murphy, K. L.. 1988. “Compensation and Incentives: Practice vs. Theory.” Journal of Finance 43: 593–616.Google Scholar
Basinger, J. 2003. “Soaring Pay, Big Questions.” Chronicle of Higher Education 50(12): S9–S11.Google Scholar
Beatty, R. P., and Zajac, E. J.. 1987. “CEO Change and Firm Performance in Large Corporations: Succession Effects and Manager Effects.” Strategic Management Journal 8: 305–17.Google Scholar
Bertrand, M., and Mullainathan, S.. 2000. “Agents With and Without Principals.” American Economic Review Papers and Proceedings 90: 203–08.Google Scholar
Bertrand, M., and Mullainathan, S.. 2001. “Are CEOs Rewarded for Luck? The Ones Without Principals Are.” Quarterly Journal of Economics 116: 901–32.Google Scholar
Bhargava, S. W. 1993. “Portrait of a CEO.” Business Week (October 11): 64–66.Google Scholar
Bognanno, M. L. 2001. “Corporate Tournaments.” Journal of Labor Economics 19: 290–315.CrossRefGoogle Scholar
Bok, D. C. 1993. The Cost of Talent: How Executives and Professionals are Paid and How it Affects America. New York: Free Press.Google Scholar
Boyd, B. K. 1994. “Board Control and CEO Compensation.” Strategic Management Journal 15: 335–44.Google Scholar
Brown, M. C. 1982. “Administrative Succession and Organizational Performance: The Succession Effect.” Administrative Science Quarterly 29: 93–113.Google Scholar
Brands, H. W. 1999. Masters of Enterprise. New York: Free Press.Google Scholar
Bureau of Labor Statistics. 2004. Occupational Outlook Handbook, 2004–05 Edition. Washington, D.C.: U.S. Department of Labor.Google Scholar
Byrne, J. A. 2002. “How to Fix Corporate Governance.” Business Week (May 6): 68–75.Google Scholar
Carroll, G., and Hannan, M. T.. 2000. The Demography of Corporations and Industries. Princeton, N.J.: Princeton University Press.Google Scholar
Conyon, M. J., and Murphy, K. J.. 2000. “The Prince and the Pauper? CEO Pay in the United States and United Kingdom.” Economic Journal 110: F640–F671.Google Scholar
Cowherd, D. M., and Levine, D. I.. 1992. “Product Quality and Pay Equity Between Lower-Level Employees and Top Management: An Investigation of Distributive Justice Theory.” Administrative Science Quarterly 37: 302–20.Google Scholar
Crystal, G. S. 1991. In Search of Excess. New York: Norton.Google Scholar
Daily, C. M., and Dalton, D. R.. 2003. “Are Director Equity Policies Exclusionary?” Business Ethics Quarterly 13: 415–32.Google Scholar
Dick, J. 1975. “How to Justify a Distribution of Earnings.” Philosophy and Public Affairs 4: 248–72.Google Scholar
Donaldson, T., and Preston, L. E.. 1995. “The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications.” Academy of Management Review 20: 65–91.Google Scholar
Ehrenberg, R., and Bognanno, M. L.. 1990. “Do Tournaments Have Incentive Effects?” Journal of Political Economy 98: 1307–24.Google Scholar
Eriksson, T. 1999. “Executive Compensation and Tournament Theory: Empirical Tests on Danish Data.” Journal of Labor Economics 17: 262–80.Google Scholar
Ezzamel, M., and Watson, R.. 1998. “Market Comparison Earnings and the Bidding-Up of Executive Cash Compensation: Evidence from the United Kingdom.” Academy of Management Journal 41: 221–31.Google Scholar
Feinberg, J. 1970. Doing and Deserving. Princeton, N.J.: Princeton University Press.Google Scholar
Feinberg, J. 1973. Social Philosophy. Englewood Cliffs, N.J.: Prentice Hall.Google Scholar
Feldman, F. 1995. “Desert: Reconsideration of Some Received Wisdom.” Mind 104: 63–77.Google Scholar
Frank, R. H., and Cook, P. J.. 1995. The Winner-Take-All Society. New York: Free Press.Google Scholar
Freeman, R. 1971. The Market for College-Trained Manpower. Cambridge, Mass.: Harvard University Press.Google Scholar
Freeman, R. E., and Evan, W. M.. 1990. “Corporate Governance: A Stakeholder Interpretation.” Journal of Behavioral Economics 19: 337–59.Google Scholar
Galbraith, J. K. 1998. Created Unequal: The Crisis in American Pay. New York: Free Press.Google Scholar
Goodin, R. 1985. “Negating Positive Desert Claims.” Political Theory 13: 575–98.Google Scholar
Hall, B. J., and Liebman, J. B.. 1998. “Are CEOs Really Paid Like Bureaucrats?” Quarterly Journal of Economics 111: 653–91.Google Scholar
Hallock, K. F. 1997. “Reciprocally Interlocking Boards of Directors and Executive Compensation.” Journal of Financial and Quantitative Analysis 32: 331–44.Google Scholar
Hambrick, D. C., and Jackson, E. M.. 2000. “Outside Directors with a Stake: The Linchpin in Improving Governance.” California Management Review 42(4): 108–27.Google Scholar
Hannan, M. T., and Freeman, J.. 1989. Organizational Ecology. Cambridge, Mass.: Harvard University Press.Google Scholar
Haubrich, J. G. 1994. “Risk Aversion, Performance Pay, and the Principal-Agent Problem.” Journal of Political Economy 102: 258–76.Google Scholar
Jaffe, M. 2003. “Average CEO Pay at Big Firms Held Steady at $11.3 Million.” The Mercury News (December 30). On the Internet at http://www.mercurynews.com/mld/mercurynews/business/7597346.htm.Google Scholar
Jensen, M. C., and Murphy, K. J.. 1990. “Performance Pay and Top Management Incentives.” Journal of Political Economy 98: 225–64.Google Scholar
Keiser, J. D. 2004. “Chief Executives from 1960–1989: A Trend Toward Professionalization.” Journal of Leadership and Organizational Studies 10: 52–68.Google Scholar
Kerr, J., and Bettis, R. A.. 1987. “Boards of Directors, Top Management Compensation, and Shareholder Returns.” Academy of Management Journal 30: 645–64.Google Scholar
Kesner, I. F. 1988. “Directors’ Characteristics and Committee Membership: An Investigation of Type, Occupation, Tenure, and Gender.” Academy of Management Journal 31: 66–84.Google Scholar
Khurana, R. 2002. Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs. Princeton, N.J.: Princeton University Press.Google Scholar
Kotter, J. P. 1988. The Leadership Factor. New York: The Free Press.Google Scholar
Kudo, H., Tachikawa, T., and Suzuki, N.. 1988. “How U.S. and Japanese CEOs Spend Their Time.” Long Range Planning 21: 79–82.Google Scholar
Lavelle, L. 2004. “Executive Pay.” Business Week (April 19): 106–19.Google Scholar
Lawler, E. 1981. Pay and Organizational Development. Reading, Mass.: Addison-Wesley.Google Scholar
Lawler, E. 1991. “The Organizational Impact of Executive Compensation.” In Executive Compensation, ed. Foulkes, F.. Boston: Harvard Business School Press, 129–51.Google Scholar
Lazear, E., and Rosen, S.. 1981. “Rank Order Tournaments as Optimal Labor Contracts.” Journal of Political Economy 89: 841–64.Google Scholar
Lazear, E. P. 1995. Personnel Economics. Cambridge, Mass.: MIT Press.Google Scholar
Leonard, J. S. 1990. “Executive Pay and Firm Performance.” Industrial and Labor Relations Review 43: 13S–29S.Google Scholar
Lieberson, S., and O’Connor, J. F.. 1972. “Leadership and Organizational Performance: A Study of Large Corporations.” American Sociological Review 37: 117–30.Google Scholar
Lubatkin, M. H., Chung, K. H., Rogers, R. C., and Owers, J. E.. 1989. “Stockholder Reactions to CEO Changes in Large Corporations.” Academy of Management Journal 32: 47–68.Google Scholar
Main, B. G., O’Reilly, C. A., and Wade, J. B.. 1995. “The CEO, the Board of Directors and Executive Compensation: Economic and Psychological Perspectives.” Industrial and Corporate Change 4: 292–332.Google Scholar
Mangel, R., and Singh, H.. 1993. “Ownership Structure, Board Relationships, and CEO Compensation in Large US Corporations.” Accounting and Business Research 23: 339–50.CrossRefGoogle Scholar
McLeod, O. 1996. “Desert and Wages.” Utilitas 8: 205–21.Google Scholar
Meindl, J. R., Ehrlich, S. B., and Dukerich, J. B.. 1985. “The Romance of Leadership. Administrative Science Quarterly 30: 78–102.Google Scholar
Meyer, H. H. 1975. “The Pay-For-Performance Dilemma.” Organizational Dynamics 3: 39–50.Google Scholar
Miller, D. 1989. Market, State, and Community: Theoretical Foundations of Market Socialism. Oxford: Clarendon Press.Google Scholar
Miller, D. 1999. Principles of Social Justice. Cambridge, Mass.: Harvard University Press.Google Scholar
Milkovich, G. T., and Rabin, B. R.. 1991. “Executive Performance and Firm Performance: Research Questions and Answers.” In Executive Compensation, ed. Foulkes, F.. Boston: Harvard Business School Press, 81–97.Google Scholar
Mintzberg, H. 1990. “The Manager’s Job: Folklore and Fact.” Harvard Business Review 68(2): 163–76.Google Scholar
Murphy, K. J. 1986. “Top Executives are Worth Every Nickel They Get.” Harvard Business Review 64(2): 125–33.Google Scholar
Nagel, T. 1979. Mortal Questions. New York: Cambridge University Press.Google Scholar
Nichols, D., and Subramanian, C.. 2001. “Executive Compensation: Excessive or Equitable?” Journal of Business Ethics 29: 339–51.Google Scholar
O’Reilly III, C. A., Main, B. G., and Crystal, G. S.. 1988. “CEO Compensation as Tournament and Social Comparison: A Tale of Two Theories.” Administrative Science Quarterly 33: 257–74.Google Scholar
Pfeffer, J., and Salancik, G. R.. 1978. The External Control of Organizations. New York: Harper and Row.Google Scholar
Porac, J. F, Wade, J. B., and Pollock, T. G.. 1999. “Industry Categories and the Politics of the Comparable Firm in CEO Compensation.” Administrative Science Quarterly 44: 112–44.Google Scholar
Raizel, R. 2003. “Healthy, Wealthy and Wise.” Canadian Business 76(23): 128–33.Google Scholar
Rosen, S. 1986. “Prizes and Incentives in Elimination Tournaments.” American Economic Review 76: 701–15.Google Scholar
Sadurski, W. 1985. Giving Desert its Due: Social Justice and Legal Theory. Dordrecht: D. Reidel.Google Scholar
Scheffler, S. 2000. “Justice and Desert in Liberal Theory.” California Law Review 88: 965–90.Google Scholar
Schellhardt, T. D. 1999. “More Directors are Raking In Six-Figure Pay.” Wall Street Journal (October 29): B1.Google Scholar
Schor, J. B. 1998. The Overspent American. New York: Basic Books.Google Scholar
Schweickart, D. 1996. Against Capitalism. Boulder, Colo.: Westview Press.Google Scholar
Seymour, R. 2002. “To Burnout and Back.” Profit 21(5): 70–71.Google Scholar
Shamir, B., House, R. J., and Arthur, M. B.. 1993. “The Motivational Effects of Charismatic Leadership: A Self-Concept Based Study.” Organization Science 4: 577–94.Google Scholar
Sher, G. 1987. Desert. Princeton, N.J.: Princeton University Press.Google Scholar
Shivdasani, A., and Yermack, D.. 1999. “CEO Involvement in the Selection of New Board Members: An Empirical Analysis.” Journal of Finance 54: 1829–53.Google Scholar
Smith, J. E., Carson, K. P., and Alexander, R. A.. 1984. “Leadership: It Can Make a Difference.” Academy of Management Journal 27: 765–76.Google Scholar
Soltan, K. E. 1987. The Causal Theory of Justice. Berkeley: University of California Press.Google Scholar
Spence, J. T., and Helmreich, R. L.. 1983. “Achievement-Related Motives and Behavior.” In Achievement and Achievement Motives: Psychological and Sociological Approaches, ed. Spence, J. T.. New York: W. H. Freeman, 10–74.Google Scholar
Tedlow, R. S. 2001. Giants of Enterprise. New York: HarperBusiness.Google Scholar
Thomas, A. B. 1988. “Does Leadership Make a Difference?” Administrative Science Quarterly 33: 388–400.Google Scholar
Treaster, J. B. 2003. “As Hancock’s Profit Declined, Chief’s Pay Rose to $21 Million.” New York Times (May 17): B1.Google Scholar
von Hirsch, A. 1993. Censure and Sanction. New York: Oxford University Press.Google Scholar
Wade, J. B., Porac, J. F., and Pollock, T. G.. 1997. “Worth, Words, and the Justification of Executive Pay.” Journal of Organizational Behavior 18: 641–64.Google Scholar
Wahlgren, E. 2001. “Spreading the Yankee Way of Pay.” Businessweek Online (April 18).Google Scholar
Walters, B., Hardin, T., and Schick, J.. 1995. “Top Executive Compensation: Equity or Excess? Implications for Regaining American Competitiveness.” Journal of Business Ethics 14: 227–34.Google Scholar
Weiner, N., and Mahoney, T. A.. 1981. “A Model of Corporate Performance as a Function of Environmental, Organizational, and Leadership Influences.” Academy of Management Journal 24: 453–70.Google Scholar
Wong, E. 2003. “Under Fire for Perks, Chief Quits American Airlines.” New York Times (April 25): C1.Google Scholar
Young, R. 1992. “Egalitarianism and Personal Desert.” Ethics 102: 319–41.Google Scholar
Zajac, E. J., and Westphal, J. D.. 1995. “Accounting for the Explanations of CEO Compensation: Substance and Symbolism.” Administrative Science Quarterly 40: 283–308.Google Scholar