“Are CEOs compensated commensurately with their companies’ performance?” I would say no as I consider that ‘executives of companies are overpaid, and their compensation amounts are excessive & inequitable’. Moreover, the chief executive officer (CEO) of a company is usually the highest-paid and their compensation is the most visible and gets the most spotlight. The first concern for the relationship between executive compensation and ownership interests can be defined as the “agency problem” as executives usually do not necessarily share the same interests as the collective shareholders. For example, Oracle’s CEO Larry Ellison cashed in stock options worth $700 million in 2001 just before Oracle’s stock price began its swoon. (Executive Pay: The Issues: December 2, 2002). Moreover, CEO pay is unduly high based on comparisons between CEO pay and pay for other individuals in jobs or between CEO pay and company performance. Because the essence of the job the CEO performs makes such comparisons as an insufficient basis for conclusions and compensation differences may arise, in part, because of differences in the complexity of jobs and responsibilities. In addition, it is much more difficult to justify the substantial amounts that have been paid to executives who left companies that have been performed poorly. Such as Cisco’s John Chambers was given a package worth about $280 million while Cisco’s profits and the stock price plunged. (Executive Pay: The Issues: December 2, 2002). Likewise, the percentage and total amounts of raises to executives have tended to be much larger than before as in recent years, there are large amounts of non-cash compensation especially stock option grants, a phantom stock plan, employer-sponsored retirement plans, perquisites as corporate aircraft adding to the cash compensation paid to executives. On top of that, there are increasing amounts in compensation package because of a contractual or voluntary severance package like ‘Golden Parachutes’, ‘Platinum Parachute’ which are given when executives were leaving that company. Therefore, for the sake of my arguments as I am proposing that ‘CEOs are overpaid’ so, I would recommend some changes from my point of view about changing the structure of executive compensation. Such as the board of directors can reduce agency problems by constructing executive compensation packages that presumably better align the interests of shareholders and executives by making ownership interests a significant part of these packages like they can include incentives, deferred compensation in the package. Moreover, regulatory groups such as IRS, Financial Accounting Standards Board (FASB) can pass a law by limiting the amount of CEOs’ cash compensation that can be deducted by the firm for income tax purposes unless a larger amount can be justified by strikingly good performance. Correspondingly, companies need to set compensation structures that should be based on the relative contribution of the employee & CEO to the company, and they need to look for answers to these questions as ‘how would the appropriate amount of the differential be determined?’, ‘how much more than the average worker should a CEO make?’ or ‘Do CEOs retain the required talents to operate in a global or technologically based competitive environment which may justify the wide gap between their and average worker’s pay?’