Are fat pay checks to CEOs justified?

We often hear newspapers, both online and conventional, report on the vast sums of money that are paid to top executives of many companies. Does that mean these people are at a low level in the Maslow hierarchy of motivation? Do they really need all this money to be motivated? What is the significance of these salaries in reality?

The motivation factors for each individual varies. Money might be a strong motivator but once the need for cash is satisfied man starts looking satisfaction of higher needs. For example when a payrise is given to a trainee he might be elated but a senior employee who is already drawing a healthy salary might not find the premise enthusing enough. Abraham Maslow, an American Psychologist suggested a hierarchy of needs. Man first looks for the satisfaction of basic needs - food shelter and safety. The highest level need that must be satified according to Maslow is the need for self-actualization or the feeling that he is completely fulfilling his potential.

First let us look into how a person could become the CEO of an organization. Often a person becomes CEO if he has founded the company or is one among the group that founded the organization. Sometimes a person becomes a CEO because the share holders in a company lay their confidence in him to take the company forward. What are the duties of a CEO? What does a CEO do? Stever Robbins at Leadership decision works.com gives a job description of a CEO. He goes on to say "A CEO’s responsibilities: everything, especially in a startup. The CEO is responsible for the success or failure of the company. Operations, marketing, strategy, financing, creation of company culture, human resources, hiring, firing, compliance with safety regulations, sales, PR, etc.—it all falls on the CEO’s shoulders. The CEO’s duties are what she actually does, the responsibilies she doesn’t delegate. Some things can’t be delegated. Creating culture, building the senior management team, financing road shows, and, indeed, the delegation itself can be done only by the CEO. Many start-up CEOs think fund-raising is their most important duty. I disagree. Fund-raising is necessary, but the CEOs contribution is in building a superb business with the money raised." Stever goes onto say that setting strategy and vision for the company, building a culture, team-building and capital allocation are the prime duties of a CEO. They look thin and understandable on paper. To quote Stever again, "The job is simple—very simple. But it’s not easy at all."

The value or health of a company is often estimated by the price of its shares in institutions like NASDAQ or DowJones. The price of an organization's shares is in direct relation to the actions of its CEO, the decisions he takes, the image of the company he promotes during his public outings, the confidence he instills in the share holders of the company. The CEO often turns out to be synonymous with the company he works for (e.g. Bill Gates of the Microsoft). The CEO is instrumental in decding the company's fortunes. If he pulls it off well the company is bound to prosper. Being the torch-bearers in an organization and being the ones who show direction, they command very fat pay checks at the end of every fiscal because a large portion of the company's success is attributed to them. Even the failure is thrust on their shoulders with the same force. By the time they start commanding those paychecks, it is already clear that their need for cash (their basic needs) is satisfied. So they would have already been past Maslow's first level of needs. Then it is a question of the hen or the egg. Why do they need those paychecks anyway?
What drives a CEO? Obviously a CEO would be one of the most well paid employees in an organization. We all feel a bit of awe when someone has the title of CEO behind his name. Apart from the salary, power, the chance to be the 'Boss', the level of autonomy that he has in taking crucial decisions are all a driving force behind him.

A CEO is the public face of the company. He is synonymous with the organization at events and social gatherings. A CEO of a successful company hogs the limelight at social events and his success stories - How he brought the company up from scratch, How he turned the company around to make profits etc; start making rounds in the media, both print and television. Thus His social needs (love and belonging needs) are met.

A CEO puts his skills to good use to solve problems. He plays the role of a problem solver or trouble shooter for his company. The degree of autonomy he has in his work and the responsibility he can shoulder can only be limited by his imagination. He grows with the company he heads. He is respected by others. Thus his being needs are met.

A CEO plays to his full potential to make the company prosper. Some of the younger bunch of CEOs even feel they can do better. They want more. They aspire to be better. They have reached the top of the Maslow's pyramid but it is upto them whether they think they have achieved self-actualization or not. If they are on the top of the pyramid then why do they need all those huge salaries and perks?

An ordinary employee in an organisation has his job cut out. His work influences his career, his colleagues and atmost his department. Hundreds of jobs exist in other organizations with the same job profile. If he is fired from the current organization he can get the same job elsewhere. On the otherhand a CEOs work, actions and decisions influence an entire organization and its course. He has no hard and fast job profile. He has to take reponsibility for his actions. Once a CEO is shown the door, he cannot become a CEO in another organization, for in the corporate world the stories of success travel fast but the failure stories travel even faster. The only option that he has is to start from scratch again. He has to rally for funds and establish a new start-up. The huge pay checks that he commands when he is at the top guarantee a secure financial future for him and his family for he faces the highest risk in the organization - He might not land up in a similar job ever again if he is shown the door.

Ever heard of the old adage that it is always lonely at the top? In the oranization too CEO is at the top and he does not have the same social life as that of the ordinary employee. Even if he wants to he might always be looked upon as a "boss". People like Akio Morita of SONY are exceptions as they have built a company culture round the concept of equality at work. It might not always be the case. Also some CEOs work 18 hour days and their lives are stressful. They need those limos, parties and expensive lunches for recreation. These social events are also a part of their job. They are promoting their company and building a brand value. The pay package of a CEO is dependent on how well the company does, what the board of directors offer him. If the stake holders think that he does not deserve such a huge package, why will they award it to him in the first place? In what forms do the CEOs take their salary? In cash? Of course not! Most of what comprises of their salary or earning is nothing but the value of their stock holdings in the company on that particular day. It is only under the discretion of the board of directors that they can get a 'credit card that know no limits' (a number of perks) like Conway and Walker have told in their report to the Gold Coast bulletin.

As already stated in the previous paragraphs, the job of a CEO is very insecure. He might never be able to work again once he is shown the door. They need those pay checks to secure their future financially so that they don't fall back to the bottom level of the pyramid where physiological needs take precedence over others. Hence in a CEOs life money becomes as necessary as food, water, shelter etc; Money is not a mere motivation factor for them. How much ever hue and cry we may rise over the salaries being drawn by CEOs around the world we have to admit a feeling of awe when someone has the title of CEO behind his name. The power, the salary and the perks, the success stories are all the reasons for the feeling of awe. We also have to admit candidly that even we might want to command such huge salaries if we ever were to step into the shoes of a CEO. It is always easy to throw in comments standing in the audience that we could have done better but it takes a lot of guts and efforts to step into the ring and throw those punches in reality.