Page 171 - Business Principles and Management

C HAPTER 6 A SSESSMENT

CASE IN POINT

CASE 6-1: Pay for Performance
Takoda Koriyama, whose parents came from Japan, is interested in how
corporations operate in Western countries, particularly the United States.
In one of his business classes, he and two classmates—Marcus Jordan
and Brianna Ashman—are assigned a team project to study the total pay
of the chief executive officers (CEOs) of 10 companies. Takoda is the
leader. Other class teams are assigned other firms. Their assignment is
to determine the total pay that individual CEOs earn in American corpo-
rations in relation to how well their firms do for their stockholders.
All three members have gathered information. Before they can pre-
pare a class report, they need to sort it all out. During their first meeting,
the group shares information and creates the chart below that summa-
rizes their main points. CEO total pay is shown in thousands of dollars.

Percent of
Corporations CEO Total Pay Shareholder Return
Walt Disney $ 594,892 56
Citigroup 491,976 146
General Electric 151,179 199
Occidental Petroleum 110,670 –11
H. J. Heinz 104,678 86
Immunex 2,437 663
Microsoft 1,696 532
Costco 1,483 373
Capital One 1,312 393
Berkshire Hathaway 842 118
Source: Business Week, April 19, 1999

THINK CRITICALLY
1. Which five company CEOs benefited their shareholders the most?
Which five CEOs benefited their shareholders the least?
2. What general statement can you make to Takoda and his team
about the fairness of pay for CEOs relative to their contributions to
their corporations?
3. If you were just elected to serve as a board member of Citigroup,
what would you recommend to other board members about the
CEO’s future pay? Provide a reason for your answer.
4. Which CEO would most deserve a raise in pay? Justify your answer.
5. Alone or in teams, as specified by your instructor, gather informa-
tion about CEO pay from Business Week, Fortune, or other maga-
zines in your library or from the Internet. Prepare a report for your
class that answers the question: Are CEOs overpaid, underpaid, or
paid what they are worth? Include any proposals you find on how
to keep CEO pay fair and under control.

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