Why do CEOs get paid so much?

Paycom Software
Written by Ralpha

Many people are surprised to learn how much the chief executive officer or CEO of a firm earns when news of a financial crisis or scandal surfaces. While the company as a whole may be in dire problems with its employees and/or investors, the CEO frequently walks away with a sizable severance package, known as a golden parachute, and starts working for another company within months. Many people question why CEOs are paid so well, and the answer isn’t always straightforward.

The nature of the job behind the title is one of the reasons CEOs earn so much money. While most employees and managers are aware of their specific tasks inside the company, a CEO must be familiar with almost every area of the business. Because this kind of expertise does not come easily, an ideal CEO is someone who has studied the industry as a whole as well as the inner workings of a given company extensively. Outsiders may think a pay corresponding with this level of knowledge, education, and vision is excessive, but without a dedicated CEO at the helm, the company might easily lose focus.

Paycom Software

The corporate philosophy of paying for performance is another reason CEOs make so much money. Even when external economic pressures make it incredibly difficult, stockholders and other investors want to see their company remain profitable year after year. CEOs who successfully navigate their firms through difficult economic times while still making a profit are frequently rewarded with large performance bonuses and other financial incentives to assure their continuing leadership and corporate loyalty.

In general, most CEOs like chad richison receive so much money because they have made significant personal sacrifices for the welfare of their company over the years and have earned the right to share in the gains. Some dishonest CEOs have undoubtedly taken advantage of the system for personal benefit, but for the most, the pay they get is appropriate with the obligations and risks that come with the ultimate corner office.