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Corporate Governance & Business Ethics Case Study

Case Title:

CEOs in the US: Are they Overpaid?

Publication Year : 2010

Authors: Ananthi.R, Doris Rajakumari John and Syed Abdul Samad,

Industry: General Business

Region: Global

Case Code: GOV0050IRC

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
The widening gap between a CEO's performance and pay packages in the last couple of decades has resulted in raging controversy. Executives responsible for lack of performance bagged millions of dollars as pay packages, while those who recorded results were comparatively paid less. Some CEOs have been accused of numerous outrageous perks such as wine allowance, unlimited passes for theme parks and protection for the loss on the sale of a house when the executives switch from their existing office to a new one. With the differences mounting between CEO's pay and performance, it becomes significant to discuss whether CEOs are worth this kind of money, the basis on which their recompenses are fixed and whether the board's move to declare such hefty pay packages could be justified while the shareholders are disappointed.

Pedagogical Objectives:

    The case attempts to achieve the following pedagogical objectives:

  • To trends and parameters of fixing CEO's compensation
  • To rationale behind the CEO's compensation structure
  • To analyse the factors that forced Maytas twins into the financial crisis
  • To advantages and pitfalls in linking CEO pay with company performance, and giving guidelines for fixing the right compensation structure.

Keywords : Soaring / ballooning CEO pay packages; Outrageous CEO compensation / perks; Basis for pay fixing; Pay-for-performance; Worst CEO perks; Most overpaid CEOs in the US; Compensation consultants; Depot's Robert Nardelli; Chen Jiulin / China Aviation Oil; Lawrence Ellison - Oracle; Jack Welch - General Electric; Jim Kilts - Gillette; Sarbanes-Oxley Act of 2002; Insider loans; Corporate and accounting scandals

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