Are top executives worth what they are paid?
The issue of executive compensation is one that has raised media and public scrutiny for many years. On the one hand, executives are viewed as being afforded exorbitant compensation packages, while the other paints a picture of select and fortunate individuals who provide a service that is unmatched and are therefore worthy of larger compensation packages and perks. However, due to the economic hardships facing the global environment it is clear that executives are being rewarded at a level that is not commensurate to their contributions to the organization.
In 2012, the average multiple of CEO compensation in the United States to that of regular employees, was 204, which shows an increase of 20% since 2009. For 2013, the multiple has increased further to 350, which means that the average executive made 350 times the average employee in wages and benefits (Smith and Kuntz 2013). This is justified as being an investment by the firm, placing their confidence in the ability
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He states that critics err in passing judgement on the success rate of CEO’s, and that their pay is strictly driven by market force. He also indicates that there are two ways to assess top executive pay but they are often used in misleading ways. The first is the estimated or ex ante value, which includes salary, bonus and the value of restricted stock issued that year. This is only an estimate of what the executive should receive from the board for a given year and is not a measure of what they take home because the executive does not cash in the stock options. The second tool is realised or actual pay, which includes salary, bonus, value of restricted stock and the value of options exercised that year (Kaplan 2008). This means that estimated pay is always higher and this is what critics use to justify why executives are overpaid even though the actual pay is much
According to Charity Navigator (Are Nonprofit CEOs Overpaid?), certain industries pay more than others, specifically; an executive can earn more at an Educational charity rather than a Religious one. Geographical location typically reflects the variations in cost of living throughout the country. Naturally, charities with larger budgets can afford to provide higher compensation. The focus of an organization's mission can also have a significant impact on the amount of compensation available. The board of a nonprofit should have a documented policy for determining compensation and raises. While there are not very many charitable organization executives earning over $1 million dollars annually, it should still be of concern because such an amount is quite
Employees protested, “that supervisors should have received a reduced bonus because they were not working as hard as they are and the company might be playing with the numbers” (Beer & Collins, 2008 p.6). A beneficial system for the new Scanlon Plan is to rearranged payout count. This will help to regain trust amongst employees and management. Equity Theory stresses integrity to all compensation arrangement and if this is effectively executed, then this will resolve the mistrust issue that employees have with their management team. The rewards should not be paid on a consistent month-to-month basis, instead, on a settled proportion plan, which gives rewards "each nth time the right behavior is demonstrated" (Bauer and Erdogan, 2013, p. 112). Traditionally, this would imply that workers are paid reward each time a specific measure of cash in permitted payroll is met. “The current permitted payroll is at 38% of sales value” (Engstrom, 2008). This requires no change. Instead, when Engstrom comes to a permitted payroll of one million dollars, then 10% of that sum should naturally disbursed to workers as rewards. This tackles numerous past issues with the Scanlon
...ith strong share price and some of them will get the organisation with the worst conditions of company performance. This is when the corporate governance bringing the right direction for organisation making best practice in deciding executive remuneration to sufficiently attract and motivate, eventhough to reach the satisfactory result there is a long way to go, involves time and efforts. The executives' remuneration at WH Smith especially for CEO is considered appropriate because it does not rely on agency theory alone but also considered the guidelines of the UK Corporate Government Code (2010) which is to attract, retain and motivate directors. To support this argument, “high pay itself is not evidence of inefficient contracts but may simply reflect the market for CEOs and the pay necessary to attract, retain, and motivate talented individuals.” (Conyon, M. 2006)
Executive compensation has been studied for many years. While the average person probably does not think about it on a daily basis, it is necessary to watch trends. Tracking the amount of money they make as well as the bonuses, stock options, and other benefits shows how these executives are making such high rates of pay compared to the ordinary worker. Tracking how much an executive makes began in the 1930’s. Since this time not only has it been tracked but there have been many changes in the type of tracking, the tax laws and what is available as compensation. This paper highlights the changes that have occurred since the early 20th century until today and changes that still need to occur.
They only make a little more than average household income. The CEOs, athletes, celebrities that do make millions of dollars are those who worked for it and therefore it is completely justifiable. People need to quit blaming others for their downfall instead of arguing about the pay gap between CEO and workers they should strive to become a CEO. Anything is possible, and everything is reachable with the correct
The above examples of pay show that the more skills, experience employees are with the organization the more they are compensated. Organizations would benefit by utilizing the same practice’s Disney extends to their workforces. For those businesses whose primary purpose of their plan is to only meet compliance requirements could greatly benefit by developing a comprehensive benefit plan. This could help increase their return on investment. The value I believe a business may gain from Disney’s compensation plan is to appeal to competent workers, to maintain those workers, and to motivate workers to direct their energies towards achieving the goals of the organization. Companies can set up policies to conduct a market study on a regular basis to implement a real performance appraisal system and then work on retaining good employees and elimination of poor performing workers. By following Disney’s lead of in obtaining those who best fit their company’s culture and supporting the company’s Mission. To guarantee that the pay structure is externally competitive, a pay survey should be shown. The results of a survey to be valid, the market pay data must be from the relevant labor market for each benchmark job. I would advise that a survey of regional and global pay data should be collected from the company, because for example, most of the office support, HR and operations jobs will be filled by local applicants. A job analysis is the procedure of reviewing jobs in an alike business. The result of this process is a job description “that includes the job title, a summary of the job tasks, a list of the essential tasks and responsibilities, and a description of the work context “(Burke, 2008). A job description consists of the knowledge, skills and aptitudes necessary to do the job. A job evaluation is the process of adjudicating the comparative value of job within a company
Sumo, V., & Weitzman, H. (2013). Are CEOs overpaid? The case against. Retrieved from Capital Ideas: http://www.chicagobooth.edu
Which is why, in practice, nobody ever is. "(Ussem pg.3) Not only are they overpaid, but they can never get fired. It is rare to hear that a CEO got fired over something that didn't make sense. These companies now a days make these ridiculous contracts that basically create a relationship with the CEO and don't give him a chance to get fired.
Does high compensation for CEOs actually increase company performance? Due to the limited recipients of these compensations, I do not consider this to have a positive effect on the company’s performance. The concept of a few being reward while the majority receive nothing in return for their hard work has a negative correlation to the morale and performance of a company. If everyone is expected to perform their duties as a means of achieving success then everyone should have an opportunity to receive benefits from such
Research on the concerned topic has shown that the pay gap has increased due to a number of reasons such as the significant differences in the basic salary, in addition to the elements of performance based remuneration process which continues to widen this gap. Secondly, the use of market rates to decide remuneration, thirdly balancing short-term and long-term incentives, fourthly, directors’ decision in their own remuneration and lastly good faith of directors and success of the company as a whole. These reasons are further illustrated in detail in the following sections.
In any organization, sometimes, monetary schemes doesnot get people involve to pursue work in a certain way, rather it demoralize and threatens the self-esteem of employees. According to Meyer (1975), “the basis for most of the problems with merit pay plans is that most people think their own performance is above average”. The amount may ...
Remuneration management is defined as the sum received for an employment or service delivered, this includes the money received on a monthly basis as well as benefits given as rewards (investopedia,para.1 ). Individualism need to be taken into account when implementing these remuneration structures or reward schemes, equal pay plays a role in balancing earnings among the diverse workforce (Shen, Chanda, D’Neetto and Monga,2009,p.241). The Woolworth’s Holdings uphold remuneration policies which have the purpose of making sure to attract and hold on to the best talent, that they are congruent with the strategies of the company and are the determinants of performance during the short and long phases. The policy considers the board members and the employees. This policy manages employees of the company by giving...
Attracting and retaining the most talented employees is essential for long-term organizational success. An important component to attracting and retaining such employees is the design and implementation of an effective compensation and benefit system. Assuming the role of a highly regarded human resource consultant hired to review, analyze, and revise the compensation and benefit system utilized by my city’s largest employer, Holland Enterprises, this paper presents a revised compensation and benefit strategy that suits the firm. This proposal describes how an effective compensation and benefit system could contribute to organizational effectiveness in the firm, the principle components of the revised compensation and benefit system for the
The total pay package has a direct impact on the successful recruitment, selection and the retention of staff within any organization. This pay package is critical for any business to remain competitive in today’s business world. Competitive compensation packages are vital to both large and small organizations as they encourage the retention of talented staff.
The path to achieving great success is not easy. Whereas there are many shortcuts, the long and patient walk is what takes a person many miles ahead. This concept applies to any individual who aims at becoming a successful businessman. The process of becoming a successful businessman requires a person to attain several accomplishment levels. Each of the level takes energy and time, as well as the ability to recognize the things that make a person truly successful in the business world and life. Becoming a successful businessman requires measurements that take into account not only the monetary and material gains but also the greater scheme of things. Therefore, true success measure achieves in light of creating wealth and value. These factors are vital in the lifetime of success as they present an intangible worth and measurable profit. This essay discusses the way a person can become successful as a businessman.