The highest ranked executive position in any company is the Chief Executive Position. A Chief Executive Officers makes major corporate decisions in the company. He/she manages the resources of the company and is in control of all the operations too. CEOs answer to a board of directors and informs them of the companys progress. Since CEOs are the top bosses of their business, they earn huge amounts of money. Some more than they deserve. The nature of their jobs also exposes them to significant amounts of money that flow in and out of the company. Some resist the urge to keep a share of the money to themselves while others do not. CEOs dont openly take the money as it would be incriminating rather they turn they self-interests into common good by taking advantage of the market. This means they take their interests and turn them into companys interest and in the process increase the money they earn. Some people like Warren Buffer would say they are greedy because they take more than they need but to fully affirm the allegations one would have to evaluate the ethical aspect of it.
In 1776, Adam Smith wrote a book titled An Inquiry into the Nature and Causes of Wealth of Nation in which he publicized the invisible hand theory. The invisible hand theory states that Each person while struggling for his gain of necessity advances the public interest by the free exchange of goods and services creating a division of labor and a free market. It means that people benefit the society without necessarily knowing it when they strive to make a living for themselves. Through invisible hand theory, one can turn self-interest into the common good. That people can turn their daily routines, needs and wants to turn an economic benefit (Smith, 1776). Self-interest could be ones wish to start a business enterprise. The enterprise would need laborers hence creating job opportunities for others. The tax will be paid, and licenses to operate the business will be revenue to the country (Eatwell, Newman & Milgate, 1987). Hence according to Adam Smith self-interest can be good. However, it can also be bad especially when it blinds one. Self-interest can make one take huge risks at the expense of other people needs since one is blinded by the possibility that the risk could bring in more money for them. In the 20th century, people took advantage of the assumptions in the invisible hand theory to transform self-interests into common good which also became the economic theory.
The first assumption of the theory is the consumer sovereignty (Ikerd, 1998). Consumer sovereignty means that the consumer determines what flows into the market. A consumer can only purchase a commodity that is in line with his/her tastes and likes. Therefore the seller will have to look for a product that satisfies the needs and wants of a consumer. Whether the product is good or bad does not necessarily matter to an economist as long as there is a huge demand for it, the supply will be constant. It means that the consumer is always right. He will buy whatever he wants at the price he wants. Sellers till today live by this assumption, and so do CEOs they will invest in what they think the people would want even though it may harm the company financially.
The second assumption is that markets are competitive (Ikerd, 1998). The theory assumes that there must be buyers and sellers in the markets. A competitive market means that there so many buyers and sellers such that a single seller or buyer can determine the price of products in the market. It means that even if a big buyer withdrawals from the market the seller will hardly notice since there are more big buyers left. The competitive market also assumes that all products are the same or identical. If commodities are different, then it is assumed that they belong to a different market. If a manufacturer adds value to his/her product, he will have created a market of his own, and therefore it cannot be competitive unless other producers infiltrate the same market. A market is considered competitive if there is freedom of entry by buyers and sellers. It means that it should be easy to start and end the business. For example, if prices rise they suppliers should be able to enter the market and if the prices drop they should be able to quickly exit the market before they incur any loss.
The competitive market also assumes that there is perfect market information (Ikerd, 1998). That the price of a commodity reflects its actual value. That advantages and disadvantages of a product are openly and publicly displayed so that the buyer can make an informed decision while buying it. Producers create a market of their own and incur all the risks that come with it and thus reap all the profit. CEO take advantage of this assumption to bring in money for the company and themselves. They fill in market gaps and have the edge over products thus they control the market and can do as they please with their products especially if the market is big.
CEOs are aware that the market is not entirely competitive. They know that the number of buyers and sellers is not equal or proportional. They are also mindful of the fact that their products cannot be identical in the market because there will be low profits. They also know that it hard to penetrate and leave the market thus one cannot just start a business and then leave it at will. Therefore, they use such loopholes to their advantage to control the market. CEOs will want to stay ahead of their competitors. Thus they will modify their products and make them seem different to create a market of their own (Berry, 2005). Since information is not perfect, companies will deceive the buyer into believing that their products are better to make high sales. Such a move ought to bring in bulks of money to the company which consists of shareholders and employees, but they hardly see any changes.
Some claims refute that markets automatically transform self-interest into the common interest. First self- interests do not necessarily have elements of common good. Common good means the greater welfare of the people generated by the business. Some self-interest is based on selfishness and greed because they only benefit individuals and not the greater good (Belousek, 2010). For example, when an army soldier steals firearms from his military base and sells them on the black market the self-interest cannot be for the common good just because there is a huge market for it. First, the business is illegal and therefore wrong. Secondly, the black market is big thus the soldier can make much money in this kind of business. Thirdly selling the firearms in the black market puts the society in danger. It means thieves, kidnappers, serial killers and all bad people in the society can have access to such firearms. Therefore such a self-interest does not in any way benefit the society. The second claim is that it is wrong to assume that markets automatically transform self-interests into common good because some self-interests may lack any market due to their nature (Belousek, 2010). For example, a Kenyan man who has lived in Australia for fifteen years may miss the diet and food from home and may even cook it in his house at times, but he cannot open a hotel for the same especially if he is the only Kenyan in town. The self-interest is good and legal, but it has no market thus cannot be transformed into common good. However, if the self-interest for the Kenyan man is to own a hotel in Australia, then the market will automatically transform the self-interest into the common good.
According to an article posted on NewDaily, Australians CEOs earn more than they can admit. It says that the ten highest paid CEO is in Australia collectively earn $171 million as per 2014 research. That is much money circulating among ten people. That amount of money could pay approximately 2137 people if they earned a decent salary of 80,000 each per month (Fernyhough, 2015). Since the amount is too much, most companies indicate otherwise in their reports. The article continues to say that based on companies statutory reports the ten CEOs earn a total of $99.63 million as per 2014. That is approximately $ 72 million less the actual figure. The ten CEOs belong to the mining sector, healthcare, insurance firms and real estate industry. They earn much money, yet the employees mainly get peanuts compared to them. It is unethical. If the CEO truly believes that they have right to such huge earnings, then it should state clearly in the companies report books. It should not be secretive.
CEO, s do not get their hands dirty, yet they get the largest piece of the cake. They do not need $171 million per year. That money is too much. Australia has the largest number of volunteers who do not ask for anything in return of their services. In their way, they make the country better. They take care of the elderly, some fight fires and rescue trapped people in burning houses and other take care of the sick (Clark, 2016). They do not ask for payments, favors or gifts for their time and services. The CEOs in the same country ask for more than they need. They even lie about it in the company reports. Most CEOs cannot invest their time in activities that wont generate money and when they evaluate risks they are blinded by what they might get in return. Some CEOs also embezzle companys money and leave many people suffering the loss of jobs and livelihood.
The money that CEOs earn in Australia is too much. It would be safe to say they are greedy. It is unethical to earn such amounts of money when one has barely worked for it. Most CEOs spend their time traveling and playing golf (Bandiera, Guiso, Prat & Sadun, 2011). They leave the operations of the company to corporate secretaries and managing directors. Others never visit the premises and make important decisions through phone calls. Through technology, such parties and e-conference at the comfort of their homes while a common employee toils eight hours a day to earn a living.
In conclusion, CEOs should only take what they need and reinvest the rest of the money in the company. That way employees will have a bonus to look forward to, and they will be motivated to work even harder for the benefit of the common interest. Selfish interests derail the companys goals and objectives. CEO should not incorporate selfish self-interests into the running of the organization as they are the sole beneficiaries and in case the deals go wrong everybody suffers. It is unethical and morally wrong to punish over people for ones selfish mistakes.
Bandiera, O., Guiso, L., Prat, A., & Sadun, R. (2011). What Do CEOs Do? Havard Business School, 1. Retrieved from http://www.hbs.edu/faculty/Publication%20Files/11-081Berry, T. (2005). Know your Competition. Entrepreneur. Retrieved 22 September 2017, from https://www.entrepreneur.com/article/78596Belousek, D. (2010). Market Exchange, Self-Interest, and the Common Good: Financial Crisis and Moral Economy.
Clark, D. (2016). Society is suffering from the greed of the few. Ramblings, 1. Retrieved from http://ramblingsdc.net/CorporateGreed.htmlFernyhough, J. (2015). Australias CEOs earn more than they admit. The NewDaily. Retrieved 22 September 2017, from http://thenewdaily.com.au/money/finance-news/2015/09/03/australias-highest-paid-ceos-revealed/Journal of Markets & Mor Eatwell, J., Newman, P., & Milgate, M. (1987). Welfare Economics (3rd ed., p. 1). New York: The Stockton press. Ality, 13(1), 83-100.
Ikerd, J. (1998). Toward an Economics of Sustainability (p. chapter 3).
Smith, A. (1776). An Inquiry into the Nature and Causes of Wealth of Nation.
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