Pros And Cons Of Executive Compensation
In today’s current economic and political climate, executive compensation remains a touchy subject. The “Occupy Wall Street” movement and a resurgence of democratic-socialist values echoed by the likes of Elizabeth Warren and Bernie Sanders have renewed calls for financial parity first proclaimed by Eugene Debs nearly a century prior. The convictions espoused on debate stages and streets across the country consider this to be merely an ethical conundrum. Maximum salaries, eighty percent tax rates, and government regulations that are more reminiscent of Marx than Hayek illustrate simple solutions to a complex problem. While these ideologies deserve merit and respect, they are fundamentally flawed in that they reject both reality and liberty.
Executive compensation has dramatically increased over the past couple of decades; it is an undeniable fact that is reproduced by groups on all sides of the political spectrum. However, these increases are morally sound because ultimately, they are decided upon by the corporation's board and shareholders whose interests are based on the company's overall stock price. Thus, it makes ethical
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Contrary to popular belief, a corporation’s principal responsibility isn’t to provide employment, nor is it to furnish a product or service. Its main purpose is to generate capital in the form of stock increases for its shareholders. The shareholders elect representatives to the corporation’s board of directors to accomplish this goal. The men and women who sit on the board are generally former executives, politicians, or bankers who want an easy, well-paying job that can fund their retirement. These men and women hire the CEO and other executives responsible for running large, multi-national enterprises. All are predominantly paid with stock options that triple or quadruple their original base
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