The reason why CEO receives such an abundant amount of salary is not necessarily to motivate the CEO to perform well.

1. There is a theory that claims that the real reason behind the high salary and huge bonus of a CEO is to motivate the other employees, those in the lower positions, to “work hard in the hope that they too will one day be overpaid like the CEO.” This is quite brilliant. So instead of motivating one person e.g the CEO, the high salary is used to motivate hundreds or thousands of the subordinates to input higher effort for job promotions.
2. Having said that, the high salary does not actually do any good to the performance of the CEO. In fact, there’s a research that says the salary can actually backfire the company. The CEO is likely to fail to perform due to the i-must-perform-or-else-they-will-take-away-the-money pressure induced by none other than…wait for it….the high salary.

Interesting.

Read: The Upside of Irrationality by Dan Ariely

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