I came across an interesting article in the Wall Street Journal about how more and more companies are taking into account a CEOs net worth and past earnings in order to justify reducing or limiting their compensation. I encourage you to read the article, which can be found in its entirety at Yahoo! Finance.
The article states that Nearly 15% of Fortune 500 firms said they took such “accumulated wealth” into account in setting 2007 executive pay, up from 8.4% in 2006. So it certainly isn’t the norm, but it does look like it is an increasing trend. Even though there has been increased scrutiny on executive compensation, is this a fair practice?
How Much is Too Much?
That is the question, and is there even an answer? Who is it to decide how much wealth is too much? Of course, when asking the typical working class person, they probably thing everyone making six-figures or more is making too much, but isn’t it all relative? One could argue that once someone has tens, or hundreds of millions of dollars that they don’t need to continue to pile on the millions, but where is that line drawn, and is it the same for everyone?
I don’t know the right answer, but I do have some thoughts on the topic. But, I want to ask you first. What do you think? Is this practice fair, unfair, or make no difference? I’m sure there are a number of different opinions on this topic, and feel free to elaborate on them. I’ll chime in later today after the discussion gets started and share my point of view.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.