THE BLOG

How much CEO Compensation is too much Compensation?

02/04/2009 03:37 pm ET | Updated May 25, 2011

Should the government get involved in setting compensation for all CEO's or just the ones that are running companies that we, as taxpayers and the government had to bail out?

I hope the government will not have to reach so far as to interfere with a properly functioning free market economy. But, what setting some rules for a company that failed in the free market economy and needed to get bailed out?

It is pretty tough for the average worker to understand how or why CEO's deserve 170 times the amount that the average worker in the U.S earns. Do they work that much harder or longer? Or, put differently, do they work that much harder or longer than they did in the 1970's when they earned a mere 40 times more than the average worker? How much value are they creating for shareholders and what percentage of it are they receiving? Even Warren Buffet has expressed concerns with recent pay levels for CEO's.

I suspect that when pay packages hit between $50 million and $100 million per year for CEOs, they do not need to have a long term focus for the company or themselves! They simply needed a few good years to earn the big bucks. Thereafter, they are able to buy an island and create their own world, if they so desire. This type of short term pay for performance focus may have influenced their thinking to do all that was possible to maximize earnings for their company in the very short term (think high yielding sub prime mortgage backed security investments), at the expense of long term viability.

I must admit, I may be simply jealous that over my recent twelve year tenure as CEO, I was closer to the differential that CEO's were paid in the 1970's. Although, I am not complaining.