Section FourCASE 4-2
CEO CompensationMany readers have probably had a conversation in which a
friend or coworker expressed amazement at the extremely high
compensation of some chief executive officers (CEOs).
Inevitably, there is a question of how such huge amounts of
compensation can be justified. A notable example includes the
Walt Disney Corporation’s CEO who received $203 million in
one year.^1 Another includes $58.5 million to the CEO of U.S.
Surgical Corporation.^2 Still another includes a signing bonus of
$10 million and $180 million in stock options for the incoming
CEO of Global Crossings who resigned after one year.^3 Even
severance packages for some CEOs are huge. The former CEO
of Mattel resigned after substantial financial losses in the
previous quarter and was given a $37 million package and over
$708,989 per year for the remainder of her life.
Graef Crystal, a noted critic of CEO compensation, has
spent a great amount of time studying the subject. For
example, in his study of CEO compensation in health care
organizations, in which there is great variance in compensation,
he found no rationale according to organizational performance
or size. Further, he discredited supply and demand