PHIL 237 Lecture 11: Lecture11_mar9
PHIL 237
Lecture 11 — March 9
Executive Compensations
Socio-Economic Equality
-Economic equality has a large impact on moral justice. The gap between the rich and the
poor is becoming larger every year, in the buisness world specifically
Executive Compensation:
-The total reward provided by the firm to the top level of executives in a corporation. Includes:
salaries, bonuses, incentive payments, and deferred compensations (plans, stocks, options
etc)
-Corperations: legal differences between what each can do depending on the state/province
-There are suppliers, employees, the people that provide the labour are the ones also in
charge, people that have ownership rights are the share holders
-50% of all income in general, goes to the top 10% of the world
-Jeffrey Moriarty: Do CEOs get paid too much? there are 3 views, the agreement view, the
desert view and the utility view
1. Agreement:
2. Argument:
3. Utility: we believe they will work harder if we pay them more and the products they make
will be better in performance
Jeffrey Moriarty (2005): “Do CEO’s Get Paid Too Much?”
“In 2003, CEOs of the largest US corporations were paid on average $8 million, 301x more than
factory workers. Moriarty argues that CEOs get paid too much…Offers two ways CEOs pay
could be reduced”
The Agreement View: a just price for the CEOs services is one that results from an arms-length
negotiation between an informed CEO and informed owners
-It is not shareholders taht negotiate with the CEO, but rather elected representatives. These
reps must be:
-Independent
-Informed
-Moriarty argues that the representatives will be informed, but not independent.
-Three factors compromise directors (representatives) independence:
1. Gratitude for having secured a director’s job
2. Serving their self-interest a a CEO in a similar firm
3. Do not pay with their own money (agency problem)
The Desert View: CEO should get the wage he deserves, that the wage a CEO deserves is
determined by his contribution to the firm, and that the proper measure of contribution is firm
performance
-Two problems with the Desert View:
-Identifying the standards for deservingness:
1. Physical effort
2. Contribution to the firm (value)
3. Ability, skill or training amount
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Economic equality has a large impact on moral justice. The gap between the rich and the poor is becoming larger every year, in the buisness world speci cally. The total reward provided by the rm to the top level of executives in a corporation. Includes: salaries, bonuses, incentive payments, and deferred compensations (plans, stocks, options etc) Corperations: legal differences between what each can do depending on the state/province. There are suppliers, employees, the people that provide the labour are the ones also in charge, people that have ownership rights are the share holders. 50% of all income in general, goes to the top 10% of the world. Jeffrey moriarty (2005): do ceo"s get paid too much? . In 2003, ceos of the largest us corporations were paid on average million, 301x more than factory workers. Moriarty argues that ceos get paid too much offers two ways ceos pay could be reduced .