Over the past few years, the pay practice for corporate CEOs has long been a matter of controversy, especially recently, as the wages of average workers have stagnated and economic inequality has moved to the center of the national debate (Holmberg & Schmitt, 2014). According to American and CEO Pay by The Rock Centre for Corporate Governance at Stanford University in 2016, 74% of American believe that CEOs are not paid the correct amount relative to the average worker. Because a company’s pay structure is well thought out, CEO have more responsibility than other workers, and CEOs spend more time working than average workers, I believe that CEOs are worth the high pay.
Firstly, some companies are willing to pay their CEO with the high amount of money for a designated purpose. CEO compensation is a serious problem, but high pay is not the main issue. The public and media pay more attention to how much CEOs are paid instead comprehend the real problem—how CEOs are paid (Jensen & Murphy, 1990). At most companies, CEO’s pay comes from annual bonus and stock option gains. If a CEO gets a large payment, it is likely that the company is successful. Then, why most companies establish this payment strategy? Because they want to attract, retain, and motivate their CEO to perform at the highest level (Kay, 2006). They want something in return; for the sake of company’s future success. Pay-for-performance is one of the best payment systems that used by the most company on a global level. This system can increase the effectiveness of workers and at the same time motivate them to improve their work-performance in order to gain more profit to the company (Rehman & Ali, 2013). CEOs are the main key to determine whether and how well a company will succeed, this supporting system is very important as it will affect their CEO performance. This statement supported by graphic CEO Pay vs. Performance from 2010-2014 from The Wall Street Journal in 2015, 300 top highest paid CEOs are more likely to increase their performance and bring a positive return to the stakeholder.
Secondly, CEOs have more responsibility than other workers in the company. CEOs are responsible for creating, planning, organizing, implementing and integrating the long-term strategy of a company in order to increase shareholder value. In fact, CEOs do not do all jobs in the company, but they have to decide a sense of vision and a clear idea which the company should follow (Heathfield, 2017). CEOs are very influential because they have an authority to decide the final decisions for a company. Furthermore, CEOs are not only responsible to stakeholder but also to all employees in the company. Once a CEO takes a bad decision, it will result in company failure and will affect the living of all employee. This statement is proved by Enron Corporation bankruptcy in December 2001 (“Enron Scandal: The Fall of a Wall Street Darling”, 2017). Enron bankruptcy is one of the worst bankruptcy in U.S. history. Jeffrey Skilling and Kenneth Lay, the former CEO of Enron Corporation were found guilty for conspiracy, insider trading, securities fraud which caused company bankruptcy. Because of their actions, 5,000 workers and one-quarter of its 21,000 employees lost their job, health care and life-savings (Paulsen, 2002). This would not have happened if the CEO performance was good. With this intention, CEO’s position is the most crucial position in the company and for this reason they legitimately worth high salary.
Thirdly, CEOs spend more time working in comparison to average workers (Pullen, 2015). Today’s CEOs are busy and getting busier. According to a survey by CEO.com, 256 CEOs and C-level executives showed devotion to their brands, investing years of blood, sweat and tears, high-intensity work weeks, and taking only a few vacation days per year. The CEOs they surveyed, reported that they work an average of 57.8 hours per week or 10-11 hours per day. Including 2.5 hours in the average of meeting every day. Nevertheless, the average working hours for full-time workers are 47 hours per week or 6-7 hours every day (Gallup Research, 2014). In another word, both CEO and workers are over-worked (Pullen, 2015). But we can see the difference on the sleeping schedule. On average, CEOs get 6.7 hours of sleep per night. When on the other hand, the average American gets 8.75 hours of sleep per night (Bureau of Labor Statistics, 2015). Approximately 80% of the CEOs surveyed say they wake up at 6:00 am or earlier and only 3% snooze past 8:00 a.m. Despite their early wake-up, CEOs tends to stay up late for work. Over 66% go to bed at 11:00 pm or later. Bold 8% are up past 1a.m. In view of Health, the daily schedule of CEOs is very risky for their health. In general, the person who categorized in adult (age 24-64) have to sleep approximately 7-9 hours every night (National Sleep Foundation, 2017). A study showed that in case that a person having less sleep in a day will increase their possibility to suffer from Hypertension (Calhoun & Harding, 2010). Moreover, long working hours, amount of work, and difficulty of the work are factors for work-related stress. (Tenibiaje, 2013). Seeing that CEO’s schedule and works are very heavy, the probability for them to suffer work-related stress is very high. From the data showed above, it is true that CEOs are spending most of their time to work and have a bigger chance to suffer from sickness and work-related stress. They can’t spend more time with their family and less privilege for leisure time. As the matter of fact, it is fair for them to get higher pay than other employees.
In conclusion, instead of focusing on how much CEOs are paid, the public should concern more about why CEOs are paid with the high amount of money. There are many reasons why CEOs are paid high. First, CEOs have an important role in the company with big responsibilities. Their decision will decide either a company will succeed or otherwise. Second, they also spend most of their time to work than average full-time workers. They put more effort into the company than to their family. Last, a company pay structure is well thought out. Every company has their own payment system and methods to pay and motivates their CEO. Therefore, if CEOs can perform at the highest level and fulfill their responsibility very well, they worth the high pay.