The high salaries paid to CEOs are not justified. To what extent do you agree with this statement - Essay Example

To the contrary junior employees’ salaries have stagnated or dropped and where they are raised the increment in percentage is insignificant compared to the CEOs increment in percentage within the same period. The paper will aim to consider the various facets surrounding the issue and the evidences under each. The CEOs salaries are not necessarily the true reflection of their performance or skills and therefore not justified to be that high. Companies that have awarded hefty pay packages to their CEOs have not been necessarily the highest performers in the business.

To some extents these companies’ performance has been dwindling over time. This phenomenon therefore has raised genuine concerns over the unreasonable salaries the CEOs take home. An example of this kind of a scenario is Eisner of Disney who pocketed 38 million US Dollars in 2004 (Stanford GSB, 2005). This was way above the average in the entertainment industry at the time. This amount was awarded not considering that under his 6 years tenure till then, the company’s performance was actually on the decline during half of that period.

The CEOs pay when compared to that of the junior staff members has risen to a staggering 400 percent from around 90 percent a decade ago (Frydman 2008). Looking at these figures and disparity one cannot help but question the trend. The obvious conclusion a lay man would lay to this scenario is that the high pay is hooked to performance and level of skill that the new manager has. In looking at this assumption it is in almost all cases that other factors other than skills and performance contribute to the huge salaries.

It has been seen that in big companies where the chance of having pay not related to performance, the CEOs end up getting more than their counterparts in the small firms. This situation is usually worse in cases where the pay has been in form of stocks and where the firm has a large shareholder. In this latter scenario there is a high likelihood