FINANCIAL ARTICLES

Directors of organisations are given the mandate to manage funds on behalf of shareholders for the achievement of the organisational purpose. In doing so directors are delegated (Jensen and Meckling, 1976) to manage the conflicting interests of several stakeholders. Directors are compensated for their role. Such compensations, though, may not be necessarily aligned with organisation’s success, thus preventing the best choice of strategy for the purpose and increasing rather than diminishing the role of self-interests.

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An outstanding pay riseIn a 2007 special report The Economist had analysed the phenomenon of the ever increasing pay of CEOs in the top 50 companies of the S&P 500. This summary intends to give the main findings for our readers and spare them the long reading.Two examples above all: Robert Nardelli received $210M when he lost his job at Home Depot. Carly Fiorina, HP, received $180M at the end of her mandate. None of them performed extremely well to justify that money; on the opposite, the shares of their respective managed companies performed poorly during their reign.Despite arguable performance the trend for CEOs is to increase their pay at fast rate. In the 70’s the ratio of the CEO pay relative to the average worker...

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