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April 01, 2010

CEO pay

One of today's hottest economic topics is CEO pay. Even in bad economic times, many CEOs make millions of dollars and continue to earn big raises. How can this be justified?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"First of all ... you have to recognize what a CEO does. The CEO is responsible ultimately to the shareholders of the corporation. And it is the CEO's job to not only keep the company afloat but maximize its value for the shareholders.

"This is a tremendously difficult, stressful and time-consuming job. And it has really gotten more so in recent decades. I mean, if you read about the average day of a CEO ... they are on call all of the time. Every decision that they make can not only affect millions of dollars but thousands of jobs.

"So it really takes a special kind of person, not only with a special personality but a special skill set to do this kind of job.

"And the point is there just aren't many people that have that skill set and that personality to do that. It is kind of like in professional sports. You have to have special skills to play professional, sports and one of the reasons why those folks get high pay is because there are not that many people that have those skills.

"It is the same sort of situation with CEOs. Demand for CEOs is high, supply is very low, hence you get large salaries."

Posted by deeshore at April 1, 2010 07:50 AM