Evaluate from an economic perspective the issue of whether chief executive officers (CEOs) of corporations are overpaid

What will be an ideal response?

The basic argument for why CEOs are highly paid is related to market conditions. On the supply side, there is a restrictive supply of corporate talent to provide leadership and direction for corporations. On the demand side, there is a high demand for individuals who have the qualities necessary to make major managerial decisions and lead corporations. These conditions of limited supply and high demand justify the high salaries. In addition, becoming a CEO has elements of a game or tournament. The fact that there is a prize for winning the tournament will encourage intense competition in a business and increase overall productivity. The critics of these market outcomes state that the compensation packages given to CEOs are too high because corporate boards of directors, often composed of current or former CEOs, overvalue the work of CEOs relative to that of other workers.