Corporate executive salaries - The argument from economic efficiency

Scott, Elaurant (2008) Corporate executive salaries - The argument from economic efficiency. Electronic Journal of Business Ethics and Organisation Studies, 13 2: 35-43.

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Author Scott, Elaurant
Title Corporate executive salaries - The argument from economic efficiency
Journal name Electronic Journal of Business Ethics and Organisation Studies   Check publisher's open access policy
ISSN 1239-2685
Publication date 2008
Sub-type Article (original research)
Open Access Status File (Publisher version)
Volume 13
Issue 2
Start page 35
End page 43
Total pages 9
Place of publication Jyvaskyla, Finland
Publisher Jyvaskylan Yliopisto
Language eng
Formatted abstract
The very high level and constant growth in salaries for corporate executives has been a trend causing debate for over a decade now. It has given rise to a range of arguments for and against high salary levels. The single most prevalent argument for high executive salaries has been the argument based on economic efficiency. In this argument, high salaries for corporate executives are justified as they form an incentive that motivates them to high performance. While striving to earn these incentives, executives achieve improvements to productivity in their firm, which benefits society. This paper considers the argument from economic efficiency from a philosophical viewpoint. Arguments for and against this justification are examined for consistency with philosophical (distributive justice) and economic theory to test their logical soundness. Empirical evidence from Australian and United States salary markets is also examined where relevant to conclude on the validity of the arguments. Most arguments for high executive pay are shown to be unsound in that they assume cause and effect by linking the executive’s actions to the corporation’s performance. Philosophically, the efficiency argument may be valid, provided empirical evidence confirms that high executive pay leads to improved societal wellbeing. However on the evidence of most studies that is not empirically true for executives in Australia and the United States.
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Unknown

Document type: Journal Article
Sub-type: Article (original research)
Collections: ERA 2012 Admin Only
School of Historical and Philosophical Inquiry
 
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Created: Mon, 30 Jan 2012, 14:59:27 EST by Kimberly Dobson on behalf of School of Historical and Philosophical Inquiry