Why are CEOs Paid Too Much?

Because it makes them perform as if they’re WORTH IT! – Why are so many CEOS of big companies overpaid, when it’s clear that they?ve made a lot of wrong decisions? Maybe it’s a ploy to make them perform better, since just thinking about WORDS associated with money makes people more self-reliant and less inclined to help others?the perfect description of the ideal CEO! Just thinking about money (those bonuses they hope to get?) can even reduce physical pain. But there’s more to it than that…

Research by economists Rachel Hayes and Scott Schaefer shows that companies have incentives to pay even bargain-basement CEOs highly to keep up their stock prices. If potential investors think the CEO of a company can deliver, they’ll be more likely to buy that company’s stock, which will mean, in effect, that he DOES deliver?whether or not his ideas and innovations actually led to these results. And this kind of “success” fills CEOs with the confidence to innovate, which will help keep their companies on top.

Schaefer says, “Pay packages have gotten so high that the repercussions of getting fired are minimal because these guys are so wealthy. They’re not afraid of taking risks.”

Art credit: freeimages.co.uk

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