CEOs often earn high salaries due to their extensive knowledge of the industry and the inner workings of a specific company. They are also rewarded for successfully navigating their company through rough seas and for their skills and business acumen, which are in high demand in the marketplace. Some CEOs technically make little or no money in real wages but earn more through profit-sharing plans, performance bonuses, and patent or licensing royalties. Overall, most CEOs earn high salaries because they’ve made numerous personal sacrifices over the years for the good of their companies and earned the right to share in the profits.
Whenever news of a corporate crisis or scandal breaks, many people are amazed to find out exactly how much the CEO or CEO of that company actually earns. While the company itself may be in dire financial straits with its employees and/or investors, the CEO often escapes a healthy severance package, known as a golden parachute, and begins working with another company within a few months. Many people wonder why CEOs make so much money, and the answer isn’t always clear.
One reason CEOs make so much money is the nature of the work behind the title. While most employees and supervisors understand their particular responsibilities to the company, a CEO must have working knowledge of virtually every aspect of the company. This type of knowledge isn’t gleaned overnight, so an ideal CEO is someone who has extensively studied the industry as a whole and the inner workings of a specific company. A salary commensurate with this amount of expertise, education, and vision may seem high to outsiders, but without a dedicated CEO at the top, the company could easily lose focus.
Another reason CEOs make so much money is the business concept of paying for performance. Shareholders and other investors want to see their company remain profitable year after year, even when external economic forces make that extremely difficult. CEOs who successfully navigate their companies through rough seas and who continue to emerge in the black are often rewarded with substantial performance bonuses and other financial incentives to ensure their leadership and loyalty in the company.
There are some CEOs who technically make little or no money in real wages. Because they already have significant personal assets, some CEOs only ask for a nominal annual salary for tax purposes. This rejection of a standard salary does not mean, however, that the CEO of a successful company like Apple Computers or IBM will become penniless. CEOs often earn more money through profit-sharing plans, performance bonuses, and patent or licensing royalties. By not accepting an actual annual salary from the company, a CEO may appear to be motivated for reasons other than personal gain.
While many CEOs make so much money from their company’s performance, they also understand that their skills and business acumen are in high demand in the marketplace. Troubled companies routinely seek out talented CEOs with a proven track record to help them avoid financial collapse. Due to this constant demand and the scarcity of qualified CEOs, many companies pay incredibly high salaries to keep their executives happy. If a competitor offers a company’s CEO a significant pay raise and benefits to jump ship, this offer may need to be matched or enhanced to keep the CEO on board.
Overall, most CEOs make so much because they’ve made numerous personal sacrifices over the years for the good of their companies and earned the right to share in the profits. Some unscrupulous CEOs have no doubt exploited the system for personal gain, but for others, the salaries they earn are commensurate with the responsibilities and risks associated with the ultimate corner office.
Protect your devices with Threat Protection by NordVPN
