Please respond to the following questions with respect to executive compensation: Can someone ever be too wealthy?  (Your analysis should include references to virtue ethics, utilitarian precepts and the effects of high executive pay upon the company's stakeholders.) Who are the real stakeholders in a public corporation? Does a CEO really control  a company’s performance? Should we measure CEO compensation against the compensation of others in the firm? Should the government set compensation caps for CEOs?  Is your answer any different if the company is receiving bailout monies? What should happen to CEOs when their companies perform poorly?

What should happen to CEOs when their companies perform poorly? It is the behavior of the CEO that leads the way and sets an example for the rest of the company and the public, and if a CEO is making millions while the company lays of workers and still loses money then that's simply a tragedy. Kant might say that they most certainly have a duty to the company to ensure that they act in a manner that is best for the company and taking exhorbant amounts of money when the company performs poorly is not a viable option. If the company does bad, the CEOs pay should reflect that.

Geoff, Well done! A few questions for you and/or your classmates to respond to in their postings to follow: What about the argument that we need to have high pay for CEOs to attract the best and brightest to the position, especially if other firms will be competing for potential CEO from the same limited talent pool? Do you really think that CEOs know more about their companies than anyone else in the firm?  I'd argue that the CEO of 3M probably knows more about operating a business than about chemistry, and that Obama knows less about rockets than the people who are helping him negotiate the treaty with Russia.  I think that a CEO's job is to surround herself with the best advisers, who almost certainly will have greater expertise in their respective fields. What about pegging CEO pay to results?  Earnings go up?  Compensation goes up.  Earnings down? Compensation goes down.  Or how 'bout saying that CEO compensation will not be more than x% of the firm's total profits, or y% of earnings or z% of the lowest-paid employee's salary? As to who the real stakeholders are in a public company, what about the public itself?  Isn't the public a primary stakeholder of Walmart if our taxes subsidize Walmart's employee's health insurance?  Or how about Enron's injury to all the people of California?  Or Countrywide's harm done to the global economy by perpetrating the crime of luring poor folks into mortgages that the lender knew they couldn't afford? Bob On Jul 8, 11:33 am, Geoff <geoffrey.r.peter

Can anyone ever be too wealthy? Short answer is not as witnessed by the outrageous sums that are paid high level executives.  Studies do show that when a company pays an enormous sum of money to it’s CEO, it is more profitable making shareholders more money.  So under utilitarian precepts, they are producing the greatest good for the greatest number of people.  Also, as long as a CEO produces maximum benefits for everyone, utilitarian states it doesn’t matter if the benefits were produced by manipulation or coercion.  I interpret this as saying it doesn’t matter how little everyone else is making, high pay is justified because it produces more for all of the shareholders of the company.  Utilitarian also removes personal emotions and feelings, further feeding into that CEO’s are justified in demanding their salaries. Virtue ethics are the characteristics of what makes up the individual.  This is fully developed by the time we are adults.  From a business point, greed and materialism is as much a part of life as honesty and integrity, so high CEO pay can be justified.  From a stakeholders point of view, if they value the positive aspects of life, they can only see the greed with which drives upper management. It would be nice, however, if those employees at the bottom and middle could have higher salaries and the way to do it is to lower someone else’s.  I’m not sure that’s going to happen! Having said all this, not all CEO’s collect huge salaries. We only hear about those that do. Who are the real stakeholders in a public corporation? Good point on your response to Geoff, the public would be stakeholders.  My original reply was going to be all employees, shareholders. Does a CEO really control a company’s performance? A CEO does have an affect on the company.  They are paid to make the tough decisions.  I’m not sure they control a company’s performance. They have to have cooperation at all levels to be in total control. Presently, CEO’s can’t control what is happening externally and have had to react to the market and make difficult decisions.  This brings me to something I don’t understand.  How, with all of the brilliant business people in this country, we are in the mess we are in? Should we measure CEO compensation against the compensation of others in the firm? I’m not sure that we should.  Once you start comparing, someone is always going to feel undervalued. Should the government set compensation caps for CEOs?  Is your answer any different if the company is receiving “bailout” monies? I’d like to say yes, the government should set caps because the business has not done a good job of self regulating.  If there had been caps, would our economy be where it is today?  That is what I would compare it to.  Are we better with it or without it?  The mention of salary caps for those companies that took the bailout money certainly made them want to suddenly give it back.  They say high salaries are justified to attract, retain, and motivate.  But if the government puts salary caps in place, is that really too much regulation?  They can’t enforce what is in place now, won’t it just make companies figure out a way around it, maybe even hurting more of the less fortunate in the process? What should happen to CEOs when their companies perform poorly? Well, they are paid the big bucks to see to it that their companies don’t do poorly.  They are there to react to market changes and keep the company profitable.  If the company does poorly, then maybe they shouldn’t be there anymore.  They certainly should not receive bonuses or golden parachutes.  This is an area I feel strongly about.  If you or I perform poorly, we don’t get a raise or a bonus.  We are lucky to keep our jobs.  They should be treated the same.

Can someone ever be too wealthy?  (Your analysis should include references to virtue ethics, utilitarian precepts and the effects of high executive pay upon the company's stakeholders.)  - According to virtue ethics - People can be too wealthy and for those with a high-level of moral character are often seen giving back much of their wealth. This behavior underscores what means to be virtuous and recognize that when one is in such a position of great wealth, that there is a limit to how much one really needs in order to live a happy and fulfilling life.  - According to utilitarian precepts, and depending on ones owen interpretation, I understand it to mean that someone cannot be too wealthy if the wealth earned provides for the greater good of the people.  Therefore, If I make $50m a year in bonuses _base_d on my performance as CEO and the end result is an increased ROI of 15% when the goal was 10%, then the large bonus payout is justified; hence the reasoning that in this context someone cannot be too wealthy. Who are the real stakeholders in a public corporation?  - The real stakeholders in a public corporation are those groups directly or indirectly (externalities) affected by the decisions of a company.  For instance in Walmarts case, the stakeholders are many, from the small merchant threatened by the 'big box' opening a store in their small town, to the distributor and vendors who find themselves unable to compete with the pricing secured by Walmart from overseas contacts. The list of stakeholders for a corporation of this size is very large to say the least. Does a CEO really control  a company’s performance?  - While ultimately the CEO reports to the Board of Directors and as an agent to the employer(principal), he/she does have a great deal of control over company performance. How so? The CEO of a company, not unlike our President, needs to surround themselves with the right talent to make the company (or country) successful.  They do not have the specific expertise to make all the day-to-day critical decisions in every aspect of the business, but they must possess the ability to think conceptually and strategically.  This means their decisions as to who they put in charge of what, directly drives the success and/or failures of a company.  The CEO is at the helm of the ship and relies on his/her crew to steer it in the right direction. Should we measure CEO compensation against the compensation of others in the firm?  - Why wouldn't we?  To think that a CEO can make 2000% more than its back-bone associate level employees, who in many cases are working for wages hovering at the poverty level, is disgraceful and brings into question the ethical nature of how CEOs are compensated.  Granted, in order to attract the right talent to insure a companies success, a firm must offer an attractive salary, but there must also be a balance against what the other employees compensation looks like. Should the government set compensation caps for CEOs?  Is your answer any different if the company is receiving bailout monies?  -  Should the government set compensation caps for CEOs? This is not a simple yes or no answer.  Companies that are performing well on their own should be left alone to continue to do so. Companies benefitting from TARP money or other bailout funds should have tighter compensation regulations put in place in order to avoid another ENRON.  AIG is a good example of abuse of funds associated with the power in senior leadership to 'share the wealth' at the expense of the tax payers.  Overall, I am against too much government regulation since all it would do is force corporations to use their time and energy to become more creative in avoiding these regulations; which may involve firms moving off shore to locations with fewer restrictions which in the long run hurts the American people through further job losses. What should happen to CEOs when their companies perform poorly?  - CEOs compensation should be commenserate with the copmay performance.  Therefore, when the company loses money and performs poorly, the CEO pay should be reflected accordingly.

Excellent points, Jean and Everett. I wonder whether a virtue ethicist would feel comfortable with extreme high executive compensation where that CEO gives all of most of her earnings to worthy causes? Would that virtue ethicist feel differently if the company was performing poorly or receiving TARP funds? So many questions ...  I look forward to hearing the viewpoints of your peers. Bob On Jul 9, 9:57 am, Everett <ep1