Job responsibilities of chief executives are great as they are the leaders of a company and make crucial decisions concerning company policy and strategy. In order to obtain the level of talent a CEO offers, a corporation must offer them large compensation packages to stay competitive against rival companies. The total compensation packages for company executives include their base salary, benefits and stock options, which are often much more extravagant in comparison to the average worker of the firm. John Rawls’s A Theory of Justice provides principles that deal with the social and economic inequalities in society like the pay gap between executives and lower employees. When companies are trying to determine the pay of their CEOs, it would be wise to apply the stakeholder theory by Edward Freeman. Stakeholders are very important in the success of the company and all stakeholders should be considered when making business decisions. By using the stakeholder theory, the boards will be able to balance the benefits and losses for everyone involved in the company
The average CEO in 2010 that earned $11,358,445 in salary would earn approximately 57 times more than 95% of all households in the United States. It is not necessary to be paying an individual such an enormous amount of money when 95% of families are able to live with $200,000 or less. In addition, there should be a moral limit on how much compensation an executive can accept as there are others in the firm whose hard work , result in a company’s success and profit.
John Rawls’s principles from A Theory of Justice can be applied to the compensation packages of chief executives to show how lopsided they are. Rawls has two principles of justice that ensures people’s rights, opportunities and income are equally available and distributed in society. The second principle applies to the compensation packages of