Ethics and Ceo Pay
Running head: LEADERSHIP AND ETHICS OF CEO PAY
Leadership and Ethics of CEO Pay
Chief Executive Officer pay in the United States has risen dramatically. In the past three decades the salary of a CEO has risen significantly beyond what can be explained by variables such as firm, size, performance, and industry classification (Bebchuk & Grinstein, 2005). According to research, the CEO pay at the nation’s top 500 largest companies averages about $10.9 million a year. The CEOs are also receiving an additional $364,000 in perks. It was estimated that the average CEO makes 319 times more than the average worker in 2008 compared to a multiple of 42 in 1980((Anderson, Cavanagh, Kliner, & Stanton, 2005). CEO pay becomes an ethical issue when CEOs are compensated in excess for poor performance and when jobs of regular workers are downsized drastically but CEO pay is unaffected. The purpose of this paper is to discuss leader character, moral responsibility, and CEO pay. Leader Character and Moral Responsibility The Leadership Character Model is an excellent model that discusses qualities that a great leader should possess. The leadership character model is a leadership theory developed in 2005 by Turknett Leadership Group. This model is an excellent prescription for a good leader and is described in terms of a pan-balanced scale. Integrity is the base and foundation of leadership according to this model. In addition to integrity, effective leadership is also a balance between respect and responsibility. Where respect exists, individuals feel a sense of partnership, equality, and fairness. When responsibility is established, each individual is willing to take initiative and act for the good of other and the organization (Turknett & Turknett, 2005). A leader’s character should be grounded in integrity. A leader should be honest and completely trustworthy. A leader with integrity doesn’t alter facts for
Leadership and Ethics of CEO Pay
Chief Executive Officer pay in the United States has risen dramatically. In the past three decades the salary of a CEO has risen significantly beyond what can be explained by variables such as firm, size, performance, and industry classification (Bebchuk & Grinstein, 2005). According to research, the CEO pay at the nation’s top 500 largest companies averages about $10.9 million a year. The CEOs are also receiving an additional $364,000 in perks. It was estimated that the average CEO makes 319 times more than the average worker in 2008 compared to a multiple of 42 in 1980((Anderson, Cavanagh, Kliner, & Stanton, 2005). CEO pay becomes an ethical issue when CEOs are compensated in excess for poor performance and when jobs of regular workers are downsized drastically but CEO pay is unaffected. The purpose of this paper is to discuss leader character, moral responsibility, and CEO pay. Leader Character and Moral Responsibility The Leadership Character Model is an excellent model that discusses qualities that a great leader should possess. The leadership character model is a leadership theory developed in 2005 by Turknett Leadership Group. This model is an excellent prescription for a good leader and is described in terms of a pan-balanced scale. Integrity is the base and foundation of leadership according to this model. In addition to integrity, effective leadership is also a balance between respect and responsibility. Where respect exists, individuals feel a sense of partnership, equality, and fairness. When responsibility is established, each individual is willing to take initiative and act for the good of other and the organization (Turknett & Turknett, 2005). A leader’s character should be grounded in integrity. A leader should be honest and completely trustworthy. A leader with integrity doesn’t alter facts for
References: Anderson, S. (2007, August 28). Executive Pay Debate Raging in Europe and the United States. Retrieved November 29, 2012, from Foreign Policy in Focus Anderson, S., Cavanagh, J., Kliner, S., & Stanton, L. (2005). Executive Excess 2005. Retrieved November 28, 2012, from Institute for Policy Studies and United for a Fair Economy Bebchuk, L., & Grinstein, Y. (2005, April). The Grow of Executive Pay. Retrieved November 29, 2012, from Harvard University: John M. Olin Center for Law, Economics and Business Matsumura, E. M., & Shin, J. Y. (2005). Corporate Governance Reform and CEO Compensation. Retrieved November 29, 2012, from School of business, University of Wisconsin-Madison Turknett, R. L., & Turknett, C. N. (2005). Decent People, Decent Company: How to lead with character in Work and in Life. Retrieved November 28, 2012