The question of whether CEOs of America's major companies are overpaid has been a perennial subject of interest for many years. Are the compensation practices for these elite men and women fair and appropriate? Do these compensation practices provide proper incentives? Or do they reward excessive caution or risk taking?
CEOs not only make a lot of money in terms of raw numbers, they make a lot of money relative to the people who work outside the executive suite. According to one study, CEO pay relative to that of the average employee has soared in recent decades from a level of 30 to 1 in 1970 to 120 to 1 in the year 2000. What's more, the compensation of CEOs in one sector, financial services, outpaces that of CEOs who head non-financial companies. One study looked at a very select group -- the people in the top 1/10th of 1% tax bracket. Executives of non-financial companies comprised 3.9% of this bracket. In contrast, investment bankers comprised 5.2% and fund managers 4.8%.
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