Ethics and Strategy Nothing in business gets as much The mix of compensation also I negative press as CEO salaries. makes it difficult to know how much In 2016, for example, Dara Khosrow- a CEO should get paid. For example, shahi, CEO of Expedia, was paid most of the "big bucks" in CEO com- $94.6 million; Leslie Moonves, CEO pensation come not from salary but of CBS was paid $56.4 million; Phil- from bonuses, stock, stock options, and lipe Dauman, CEO of Viacom $54.1 other perquisites. Most of these non- million; and co-CEOS of Oracle, Mark salary forms of compensation depend Hurd and Safra Catz, were paid $53.2 on the performance of a firm and are million each. Reasonable people ask designed to align the financial inter- "Is anyone worth this much money?" ests of CEOs and a firm's shareholders. Indeed, in a 2016 survey con- This is the case at Berkshire Hathaway, ducted in the United States, over where a key operating principle is that 74% survey respondents believed most of the personal wealth of Warren that CEOs in the United States were being paid too much. This was the Do CEOs Get Paid Too Much? Buffett and his senior management team is held in Berkshire Hathaway case even though these respondents stock. In fact, one study showed that, on thought that CEOSs in the United effectively leverage the Ben & Jerry's average, CEO compensation in excess States earned, on average, $1 million a brand. of what would be expected based on a year. In fact, CEOs of publically traded Many firms delegate the respond's business experience is positively firms in the United States earned an sibility of determining CEO salary to correlated with a firm's performance. average of $10.3 million in 2016. the compensation committee on the Of course, correlation is not cau- But determining what CEOs board of directors. The compensa- sation. The question remains open: Does "should" be paid is a difficult ques- tion committee often identifies a set a CEO must receive massive incentive tion. Some firms adopt policies that of comparable firms (i.e., firms about compensation-literally hundreds of state that their CEOs cannot make the same size and in the same indus- millions of dollars over time-just so he more than some multiple of the low- try) as its firm and then calculates the (or she) will do his (or her) job: to maxi- est-paid employee in a firm. This is average compensation of CEOs in mize returns to shareholders? And what how Ben & Jerry's Ice Cream compen- these firms. Of course, because no firm are the implications of this compensa- sated its CEO. However, this policy wants to think that its CEO is in the tion for the other employees in a firm- may have cost its shareholders mil- "bottom half" of its comparable firms, does it encourage their ambitions to seek lions of dollars because it prevented most firms pay their CEOs something employment among the senior ranks of Ben & Jerry's from recruiting a CEO over this average-a decision-making a firm, or does it discourage and demor- who would have facilitated Ben & process that ensures that, in the long alize them that one person can get paid Jerry's acquisition by a firm that could run, CEO pay will continue to rise. so much while they get paid so little?29