Is CEO Pay really Inefficient If so, propose a mechanism to improve Essay

Is chief direct officer Pay really Inefficient If so, propose a mechanism to improve capacity - Essay ExampleThe inefficiency in chief operating officers cover arises because it is rattling difficult to quantify the productivity of the family and its limit with respect to a certain individual. According to Robert (1995) Although much of the decision-making power resides with the CEO, the research and basis analysis reports argon not made by him. Hence a venture that incurs bolshiees upon the company may not guide been caused due a bad decision made by the CEO but rather incomplete or inaccurate information provided to him. These are exemplary scenarios that have much theoretical than practical basis. (Robert A. G. Monks, Nell Minow 1995) In todays world where most business ventures are base solely on the situation in the relevant markets, employee wages are no exception. The general settle of a CEO in competitors would play a large part in deciding the earnings package of a companys CEO.The rest of the essay will be divided into quaternity sections the first three will discuss the various aspects of payment while the defy would be the reason out statement. arm one will view the entire payment package of a CEO and its implications. These have a strong basis in market evaluation and the integration of the CEOs perplex in the company. Section two will discuss the Agency theory. This theory outlines the principal-agent relationship existing amongst the shareholders and the CEO and its impact on efficient pay. This relationship is both makeually binding and ethical in nature where the extent of the Agents authority to bind the company in a contract is deduced by the power given to him by the Principal.. Section three will reflect on the fence theories of Rent-extraction and the efficient market hypothesis, while both valid in nature, reflects two different sides of an employment contract. Section one Most CEOs are given the title of either pres ident or CEO. This is a very connotation in the text of CEOs. It is widely used world over. It could mean that the title holders also includes the directors which are present on the board of directors. On the other hand it could also mean the chief operating officer. When compared to the CEO, the presidents central focus is daily operations. CEO, on the other hand is more of a visionary. He projects the future of the company and determines the direction that the company takes. Thus at times, the titles of both president and CEO are used interchangeably to emphasize on the roles that both these title holders play. The increase in pay of a CEO has been six times more than the average wages paid to employees in the last thirty years. The payment package may be seen as inefficient and problematic. An internal sensitivity-analysis of firms indicates that the proportion of loss suffered by the manager when the firm suffers a loss is very small. This amount is greater for small or medium-s ized firms as the size of the business increases the loss in pay of the manager decreases when the company suffers a setback. For example, it has been estimated that in a large firm a loss of $1000 by the company only passes on a loss of $1 to the manager who in fact