Looking for the cause of the recent financial crises and the recession that followed? Look no further than the excessive compensation packages that are paid to CEOs and executives every year, regardless of whether their performances were satisfactory or not. Many of these compensation plans were designed with incentives that allowed CEOs to win, but never lose.Especially in the financial services sector, compensation packages were designed to reward CEOs for raising stock prices and making money in the short run regardless of whether the decision were high risk or would be affecting the company’s future sustainability. For example, “Citigroup and Merrill Lynch together lost $54 billion in 2008, but paid out nearly $9 billion in bonuses” (“Ethical Leadership and Executive Compensation” 7). CEO compensation raises ethical issues that make us question if the systems in place for designating CEO compensation are just and fair.
Although the government has made solid attempts at improving the systems in place, the reforms have proven ineffective thus far. There is a clear need for regulation reform and implementation of newly reformed practices. There needs to be strong links between the company’s performance and compensation. My plan is to re-incorporate ethics into businesses to lessen risks and hopefully prevent further financial crises from occurring. An ethical corporate environment will level the playing field among workers and allow the company to be more successful in the long run.