CEOs—Worth Weight in Gold

Many years ago, Sultans were paid their weight in gold, thus beginning a traditional saying about individuals being worth their weight in gold. This statement is intended to be a positive assessment and most of us would greatly value being paid our weight in gold. However, would most CEOs also value that opportunity?

 

Stockholders and boards of directors have been trying to motivate CEOs to act in the owners’ best interests by increasing the value of the company which in turn increases shareholders’ wealth. Thus, executive compensation is a tool of corporate governance.

 

Corporate governance is increasingly important as part of the strategic management process. If the board makes the wrong decision in compensating the firm’s strategic leader, the CEO, the whole firm suffers, as do its shareholders. Compensation is used to motivate CEOs to act in the best interests of the firm—in particular, the shareholders. When they do so, the firm’s value should increase. Of course, some question what a CEO’s actions are worth. They are worth a significant weight (especially in the US) considerably more than the CEO’s weight in the gold.

 

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: