Are CEO's Overpaid?

Essay by rach8630University, Bachelor'sA+, May 2006

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Plato, the great philosopher, once said that no one within a community should earn more than five times the wages of an ordinary worker. Today, wherever Plato is buried, he is rolling over in his grave. In the most recent studies, it has been found that CEOs can make up to 400 times that of the lowest paid worker in their corporation (Lipman). Executive pay is a huge controversy in today's society. There is much debate throughout the media as to whether or not CEOs deserve the outrageous salaries and bonuses they receive. Both sides of the argument present very valid points. However, the reader must analyze each side and choose the one which appeals to them the most. There are numerous sources covering the dispute over CEO pay. Some even claim that the media is the only cause of this well known argument (Reynolds). Throughout this essay, two sides of a heated argument will be presented.

Finally, in the conclusion one side of the argument will be sided with.

Historically, CEOs have always been paid much more than their employees. In 1929, Eugene Grace became the first million dollar CEO as the president of Bethlehem Steel. Even though his salary was only $12,000, Grace earned $1.6 million on bonuses. In 1933 the issue of CEO compensation was brought before the Supreme Court after American Tobacco paid their president, George W. Hill $1.3 million. The Supreme Court decided that salaries at publicly traded companies can be subject to judicial review. In the 1950's the use of stock options blossomed as major parts of executive pay. This was due to the passage of the Revenue Act which gave executives favorable tax treatment. After stock options were made available in 1983, they became the biggest chunk of an executives...