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Studies have shown that CEOs make up to 400 times the income of the average employee. Executive managers, however, are selected for the unique skills and vision they can bring to a firm. Only the best have the ability to anticipate the various economic and technological changes that impact business. For this reason, there should be no limits placed on the pay of CEOs. Their salary structure should instead, be more performance-based, and carefully thought out by the firm's board of directors. This should also apply to the so-called "golden parachute" offered to CEOs after they retire or resign from their positions.

There is nothing wrong in paying a CEO a generous salary if he or she enables the firm to
be successful and profitable. Individuals as Steve jobs at Apple Computer, Inc. are entitled to profit from their leadership successes. There is also nothing wrong with decreasing a CEO's compensation if he or she doesn't meet a firm's earnings' expectations.
The board of directors at Merrill Lynch must have faced some angry shareholders after they learned their CEO's poor decision-making cost the firm as much as eight billion dollars. They
were probably even more upset after finding out this individual's contract called for a golden parachute of around $160 million dollars! Pay a great CEO the big bucks: just don't do so for an ineffective one!

Learn more about this author, Leslie Schwab.
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