Executive Compensation

Topics: Salary, Term, Corporate governance Pages: 3 (788 words) Published: September 14, 2013
Executive Compensation

Executive Compensation
When we think of compensation, the first thing that comes to mind for most people is in the form of their income such as wages earned, or cash. However, compensation can come in many forms. Employers provide compensation to inspire and motivate employees’ performance to accomplish the organizations goals and objectives. Executive compensation is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentives such as stock awards and options (Hitt, Ireland, & Hoskisson, 2011). In this paper the author will discuss issues of executive compensation and what the future might be for these employees. What are some of the issues

It’s this author’s belief that CEO’s are overpaid. About 25% of the furor over executive compensation is from people who don’t think anyone is worth $18 million per year and many critics fall into this category stating that this level of compensation can’t be justified under any circumstances (Milkovich, Newman, & Gerhart, 2011). Some people believe that CEO’s are rewarded in the short term as opposed to long term performance which further leads to a governance issue that boards of directors need to ensure that executive compensation is focused around shareholders’ long term interests. Compensation for a senior executive comprises of a basic salary, a short-term bonus, a long-term bonus, and an additional retirement fund, and their salary is usually a quarter to a third of total compensation (Cote, 2007). Cote used a comparison of the top CEO’s salary being 400 times that of the average worker. It is the author’s opinion that the laborers of the corporation should receive a huge chunk of what would typically be the CEO’s salary and put some balance back into this equation of fair. Typically, you must analyze the market and what the market price is for a CEO in relation to the size of the corporation in...

References: Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). Strategic management: Concepts and
Cases
Sepe, S. M. (2011). Making Sense of Executive Compensation. Delaware Journal of Corporate Law, 36(1), 189-235. Retrieved from http://search.proquest.com/docview/878737047?accountid=12439
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