Why executive compensation is out of control Essay

Why executive compensation is out of control - Essay Example Many investors in the stock market all over the world believe that executive pay is running out of control. There is worrying trend especially in the United States where the annual salary of an average worker is the amount of money an executive receives in a day. Critics believe that executive bosses are not worth the amount of compensation they receive. Despite falling stock shares in the market, executives still receive large amounts of compensation. Stock market investors believe this should not be happening since their performance does not correspond to earnings. At a moment where recession and unemployment is high in many countries, it does not make economic sense to have executive bosses receive such a large amount of compensation. The excess pay awarded to them should instead be invested in the public sector and this consequently shows how executive bosses have little concern about their countries and the citizens. Economists believe that in order to clear the economic instability being experienced in the world currently, it is important that the pay of executives be tied to performance (Bebchuck, 2010). Most executive bosses control their board of directors hence they still manage to earn exaggerated compensation. The board of directors should however be able to control the compensation got by this executives and their compensation should be tied to performance instead of the power an executive has in the board. This shows how corporate governance is continuously being under rated with a show of little economic sense when just a few people are left to joke around with investor’s interests. The fact that executive compensation is determined by market demand, most executives are continuously receiving an exaggerated compensation in comparison to an average worker. Critics believe that the market forces such as demand and supply should not entirely determine their compensation and it should however