To say that American Corporate CEO’s are very wealthy is an understatement. These people are tremendously overpaid, and make up only 1% of the U.S population. Let’s first take a look at the definition of a “CEO”. In every definition that I’ve come across, the word “manager” is apparent. In essence, a CEO is merely a high-ranking manager in most cases. There are exceptions where the CEO is the entrepreneur himself for example Ralph Lauren who employs over 24,000 people and earned his salary. Other than those few, CEO’s get paid massive amounts of money, but when asked why they deserve so much, there isn’t a clear answer. When Americans learn that CEOs are compensated in the tens of millions of dollars, one can only wonder how much our local teachers or firemen make and what are the executives doing to earn such large salaries. What’s even harder to understand is these CEOs make so much more money than the men and women serving our and risking their lives. The annual uproar about CEO pay wouldn’t be as troubling if the salary gap between them and the rest of the nation wasn’t so outrageous. Why should the same people responsible for trillions of dollars in economic losses be awarded $18 million in bonuses? The amount of money made on Wall Street, doesn’t compute to the Americans on Main Street. In an attempt to understand why CEOs are compensated so highly, we might want to take a look at what exactly is required of them. Everything within the company falls on the shoulders of the CEO. This includes all the decision making and subsequently the rewards or consequences. The CEO is the figurehead of the company and is responsible for anticipating problems and for creating a mode of operation and a corporate culture that should avoid problems before they begin. The standards and expectations of the company are set by the Chief Executive Officer. They engage in corporate strategy building by consulting with senior management teams about what directions the company should take, where it should put its money and effort and how much risk it is willing to undergo in the pursuit of future gain It’s clear that there is great responsibility in this position but is it worth the seven figure salaries and the six figure bonuses they receive every year? Let’s take John H. Hammergren, chairman and CEO of McKesson Pharmaceuticals for example. His remuneration was a mind blowing $131.2 million this year. This number is obscene. It is just shy of 11% of the total $1.2 billion in net income for the entire company (Helman, 2011). As offensive as this number is, no one seems to debate whether or not he deserves such large compensation. Let’s not forget that CEO’s also oversee the doings of the CFO (Chief Financial Officer). They ultimately have the last say in how the company’s money is spent, but do they have the shareholders best interest in mind? A bulk Americans are in some way shareholders. Whether it’s through pensions or investments, there is a CEO of a company that has control of their money. Even when shareholders see a decline in share values, CEO pay still seems to be climbing. In 2011 the median pay of the nation’s 200 top-paid C.E.O.’s was $14.5 million which is up 5 percent from the previous year (Popper, 2012). This 5 percent raise is smaller than last year’s but it comes at a time of stubbornly high unemployment and declining wealth for many ordinary Americans. Not only do they have large amounts of their own money to spend, but they use shareholders money to influence government policy. Companies should get out of the political spending game and focus on doing what they were created to do: make a profit for their shareholders. The board of directors who are in charge of CEO pay have recently tried to put certain limits and restrictions on the amount of pay disbursed. They still allow tremendous bonuses but they sometimes distributed over an 8 year period depending on performance. Clearly this isn’t very efficient seeing as how the pay is still on the rise. The shareholders within the company aren’t a top priority keeping everyone else in that 99 percentile. “CEOs supposedly deserve all this money for increasing shareholder value” (“Trends in ceo”, 2012). The only problem is that pay is still increasing while shareholder values remain the same. Something isn’t adding up but it’s also not being debated.
Let’s take a look at what all of this really means for the average American. Income inequality, or in other words, the gap between the extremely wealthy and the rest of us, is increasing at incredible rates. The numbers are truly mind blowing. In 2011 CEO’s made 380 times more than the average American worker (“Trends in ceo”, 2012). To think that these people are making seven figures and the lower 20 percent of Americans are bringing home less than 20,000 a year is devastating. Ultimately this gap is only going to do more harm to our already weak economy. Between 1979 and 2009 the top 5 percent saw an increase income of about 74 percent while the lowest fifth of the population saw a decrease of roughly 7.4 percent as stated by the Congressional Budget Office (Helman, 2011). Average American households have seen stagnant if not decreasing income over the years while the rich continue to get richer. Is it that the 1 percent has so much power bestowed to them that this blatant inequality in income distribution cannot be challenged?
Anyone can see that corporate CEOs are extremely overpaid. So much that they only make up 1 percent of the U.S population but yet they hold 40 percent of the nation’s total income. The income inequality across the nation is so obvious in yet nothing seems to be done about it. As much as we try to resist federal government interference, at some point we should realize that they are the only one that can attempt to fix this nationwide problem. Unfortunately the society we live, government officials look to the rich for monetary support. My only prediction is that Wall Street will continue to grow until another bubble bursts. References
Helman, C. (2011, Oct 25). Why america's highest paid ceos are insanely overpaid. Retrieved from http://www.forbes.com/sites/christopherhelman/2011/10/25/why-americas-highest-paid-ceos-are-insanely-overpaid/

Popper, N. (2012, June 16). C.e.o. pay is rising despite the din. Retrieved from http://www.nytimes.com/2012/06/17/business/executive-pay-still-climbing-despite-a-shareholder-din.html?pagewanted=all&_r=0

Trends in ceo pay. (2012). Retrieved from http://www.aflcio.org/Corporate-Watch/CEO-Pay-and-the-99/Trends-in-CEO-Pay