Plato believed that the rulers of the ideal society should be paid no more than four times what the lowliest member of that society was paid. In the United States today, executives commonly earn many times more than ordinary employees do. In 1980, CEO compensation was estimated to be 42 times that of average employees; by 2005, it was 411 times.

In 2006, the average CEO of a Standard and Poors 500 Company earned $14.78 million.

And corporate leaders are often recompensed heftily even after leading their companies into disaster. In 2006, Henry McKinnell of Pfizer and Robert Nardelli of Home Depot departed from their respective companies with exit packages valued at more than

$200 million. Under McKinnell’s tenure as CEO, Pfizer stock dropped nearly 40 percent, while McKinnell earned $60 million in salary and other compensation. Nardelli received more than $240 million in compensation over the six years he headed Home Depot, while company stock fell 8 percent.

Business reporter Cassidy traces the use of stock options as a form of executive compensation back to the “stockholder value credo,” the notion that CEOs should act as agents for shareholders, and that a smart way to make them keep shareholders’ best interests in focus would be to tie their financial rewards to their firm’s stock performance. Stock options, granting the right to buy stock in the company at a certain price at a certain future date, became increasingly popular between 1980, when they were given to fewer than one-third of the CEOs of publicly traded companies, and 1997, when 92 of the top 200 CEOs received options with an average value of $31 million.28 Suddenly these executives had very big incentives to drive stock prices up—at least temporarily, so they could realize enormous profits. The cascade of corporate scandals that included Enron was, experts now agree, at least in part caused by greedy senior executives who wanted to get the numbers up by any means necessary.

Analyze stock options and executive compensation with the ethical toolkit. How would Milton Friedman want to recompense corporate executives? How would a utilitarian?

A deontological thinker? What would a virtue ethicist have to say about executive compensation? What would be the response of the ethic of care?