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How Much Do Executives Get Paid?

Employee remuneration is one of the primary topics that any employee considering joining or currently working at the firm is interested in. It is critical to conduct research on the average pay for your profession across numerous firms in the sector, as well as to compare your compensation to that of your colleagues, in order to maintain a good work-life and to make sound career decisions. However, one of the most contentious topics is executive remuneration. Do they actually get paid as much as we believe they do, or is it a different story? This Chicago Booth Review article explores how much executives get paid compared to other positions in an organization.

How much do executives get paid?

The article opens by stating that, according to AFL-CIO research, CEO salaries for S&P 500 companies turned out to be an average of $18.3 million in 2021. The article goes on to question if CEOs’ exorbitant remuneration reflects the value they contribute to their firms. The article backs up its assertions by claiming that the Chicago Booth Initiative on Global Markets asked these concerns to its US Economic Experts Panel ten years ago which have been reviewed in September 2022 with the members of its newly formed Finance Panel. According to the findings of the 2012 study, respondents were far less inclined to feel that the amount executives get paid is excessive.

However, a majority of respondents believed that shareholder input into CEO remuneration is good. The article goes into further detail on two claims. According to the first statement, “the typical CEO of a publicly traded corporation in the United States is paid more than his or her marginal contribution to the company’s value.” This statement’s reaction is unlikely to be guaranteed. On the one hand, respondents strongly disagree with the idea that there may be some extremes in CEO compensation, yet on the other hand, the average CEO of a well-governed, publicly listed firm is not overpaid. However, since it is not feasible to experimentally determine the marginal value with a high degree of certainty, it is still impossible to establish whether or not a CEO is overpaid. Statement 2 in the article suggests that mandating that US publicly traded firms enable shareholders to vote on CEO remuneration in a nonbinding manner was a good idea.

Summary

The article concludes by noting that the reaction to this specific remark is largely favorable, and hence, shareholders must have a say in determining marginal pay. The question of whether or not executives get paid too much has long been debated. The preceding is a thorough explanation of the topic offered by the Chicago Booth Review article.

You can improve your own career prospects and remuneration with an executive education program like Chicago Booth Accelerated Development Program (Chicago Booth ADP) offered by the University of Chicago Booth School of Business.

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