Corporate socail responsiblity - Essay Example

This paper will discuss the nature of capitalism, the nature of the corporation and the function of the CEO in order to determine if the compensation for the position is legitimate. Within the capitalist framework, individuals are compensated proportionally to their contribution to society at large. This means that the level at which individuals are able to contribute to the expansion of the GDP for the nation at large determines how much they will be compensated (Feltus, 2009). This is empirically proven true through the fact that business owners, inventors, and shareholders typically make the most amount of money within the economy.

This is because their service expands the total amount of currency that is exchanged within the boarders. The relation that this has to CEO compensation is the type of work that individuals complete. Employers are typically part of a machine that produces and/or disseminates products and services, while individuals who are a part of upper management typically perform task that involve the structuring of the organization (Feltus, 2009). Capitalism forces individuals to become either suppliers or consumers.

This is evident within the theory that drives the economy; the law of supply and demand. This laws makes is abundantly clear that individuals will not be able to break away from the cycle of consumerism and supply. This same law can be applied to the position of the CEO. There is an extremely short supply of individuals who are capable of performing the task that are delegated to the CEO because of the massive knowledge requirements and experience needed for it to function (Shleifer, 1997). Therefore when the supply his low, individuals who take those positions are able to demand more pay and salary.

In terms of the employee, there is a much larger supply of individuals who are capable of completing entry and middle level task (Shleifer, 1997). Therefore they are less capable of demanding as much for their work. In terms of the corporate structure itself, publicly traded companies have a disconnect between the owners and the operatives. Shareholders specifically vote on the board of directors who are responsible for determining who will be CEO. The corporate structure then plays a role in why the CEO is gets such a large salary, because he is the chief officer who reports directly to the shareholders.

Since shareholders attempt to maximize profit at all cost, the reason why they are willing to pay the CEO so much is because they want to create incentives for loyalty and responsibility (Clarke, 2004). CEOs exist to help maximize profit for the shareholders and determine what strategies are most and least effective in terms of the companies operations. While large compensation for the CEO is one means of achieving such ends, John Mackie claims that “Whole Foods has not lost employees it wanted to keep because of higher salaries elsewhere.

He believes that once basic financial needs are met, ‘deeper purpose, personal growth, self-actualization, and caring relationships provide very powerful motivations and are more important than financial compensation for creating both loyalty and a high performing organization (O’Brien, 2010).’” This means that the company can also benefit from paying employees even more which increases the return on investment for human capital. The function of the CEO is another overly important reason for the increased compensation that must be