Abstract

The eighties and nineties have seen much debate about CEO compensation. Critics of CEO compensation support their contention of excessive and inequitable CEO pay based on a number of factors and premises. This paper examines the validity of these arguments. We show why many of these arguments fail to persuade, in part, because they attempt to determine propriety of CEO pay without having a definitive standard for comparison. Arguments based on comparisons between CEO pay and the pay of other individuals or jobs or between CEO pay and firm performance are shown to be an insufficient mechanism to determine the appropriateness of CEO compensation.