CEO Compensation Since the beginning of time, there's been a over dweller, a monarch, a king, a CEO. A higher power has always been a factor in every corporation. CEOs are today's high archey in the business world; a chief executive officer is the highest rank in a company ultimately responsible for managerial decisions. Often given the highest salary you can imagine; a CEO receives their compensation from a variety of sources, such as their base salary, bonuses, benefits, and long term incentives (Walsh). Although legal statements of disclosure remain in dispute, the pay disparity between CEOs and employees has drawn significant attention from the media and has created numerous statistics and charts, such as, in his article The CEO Backlash, …show more content…
Motivation and performance bonuses are perhaps some of the only reasons that would be logical to leave CEO compensation uncapped. Actually, studies show the majority of CEO pay is not tightly tied to performance the number one variable to their compensation is the company's size (Mullaney). As companies slowly become monopoly and pay inequality becomes a trend, it is easy to see the injustice shown in Figure 1 and notice CEO pay increasing is like a runaway train. Though it attracts highly competent talent in offices, the high pay attracts personnel who care more about their compensation than the success of the company. Whereas when there is a capped salary, the CEO may be less greedy and he or she may feel more responsible financially. Though company size is a large factor of compensation, the company size is made through CEOs, and thus through their successful performance, a bigger pay package. The benefits of an unlimited pay for a CEO would only benefit the CEOs, budgeting is not truly a consideration when the CEO's pay is 204 times that of an average employee in the company. In the business world, most CEOs don't have a salary cap, so their salary and benefits reflect how successful and profitable the corporation is and later they are paid for their …show more content…
Labor cost control helps to obtain better quality output with the least effort and time of workers. The capping of a chief executive officers pay would provide room to compensate more benefits to average workers. As for average workers, when applying for a job, the company must disclose all of their CEO compensation information to all median pay employees by the rule of the Dodd-Frank Act and will put pressure on companies to keep top and medium salaries reasonable. By providing the information makes this a marketing technique to for employees seeking a job, proving how financially ethical companies are. Companies may claim the disclosure is expensive and too costly to calculate the salaries, showing a company's lack of ethics. Adding to companies with a lack of ethical sense, Walmart takes heat for their CEO Michael Dukes annual compensation was 1,034 times their companies median salary, taking a lot of credibility from the company (Baltimore). A CEO should not get paid more than 25x its median salary employee, this undermines the true value of a leader instead of illustrating a complete monarch of the industry. S&P 500 CEOs received pay packages worth, on average, $10.5 million. That was 344 times the earnings of the average American worker (HLSDHSKLADH). Perhaps more appropriate ratio is 25-1, rather than an outrageous wider gap
If nonprofits do not keep their goals focused and spend too much time trying to emulate big business, they will create unnecessary expenses and harm their support base as some donors may not continue to donate if funds appear to be misappropriated. High compensation does not guarantee an effective leader that will have dedication and commitment for the cause. If the compensation being considered is high enough that donors would be concerned or the board would be embarrassed if it made the news, then it is probably unjustifiably too high. It is important to attract the right candidate for leadership and the compensation plays a key role in that but it cannot be the most important
...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)
An employer who pays his employees the bare minimum will not see the same appreciation and respect as an employer who pays his employees livable wages. Lew Prince points out the various benefits that have come with paying his workers above the federal minimum since his business began. He states, “We’ve outlasted 20-store local chain and numerous regional and national chains. Most of these companies paid their employees minimum wage or barely above. My creative, dedicated, and better-paid employees won this life-or-death struggle for us” (Prince). Their loyalty also benefits Prince in the fact that he has to pay very little for employee turnover and constant training costs that other businesses struggle with. What Prince and many other business owners alike gain from higher wages reflects only a portion of the nation that will prosper from this monumental economical
Besides this, an employer can use other tools to value the commitment and the engagement of an excellent employee. As a manager, from my experience (because in my country the salaries are fixed and based on the performance I cannot decide for a merit rise) I used different tools, in order to encourage my team. Sometimes, not just the money is a satisfaction, especially for young professional they better prefer do get promoted, to enjoy different experiences (such travelling abroad for the purposes of capacity building) or even to get announced as the best employee of the year. Therefore, besides compensation, there are other forms, that are not just material but are some other honorable tools that a manager could use in order to motivate and encourage the team
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
Imagine being in a world where people are paid in cash bonuses, stock options, or generous severance pay when fired from their job due to a company merger, are asked to leave, or choose to retire. This happens to be a reality for many CEO’s and top executives of companies. We live in an economy where mergers and take over’s have become common, and to allow this option for the highest paid employees of a company is arguably unfair. While researching golden parachutes, I formed questions due to the circumstances surrounding this executive option. For example, why should CEO’s, who live very comfortably, be given a compensation package for losing their position due to a company merger or retirement when employee and shareholder’s futures are at stake? Is it fair for the rich to get richer when numerous employees below top executives are dealt the same fate from a merger and shareholders’ investments are at risk but neither receive a form of additional compensation? Of course, there’re those who support the issuance of golden parachutes, arguing they can persuade a possible company merger to not take place due to the costs associated with a top executives golden parachute package. Another supporting point for golden parachutes is, they can make it easier for higher up executives, like CEO’s be absorbed into the future merged company. I will be addressing the point of whether CEO’s and other executives deserve to be awarded a Golden Parachute option by their company. As well as a brief background of Golden Parachutes and my stance on them. They’re a very important part of our growing economy and will always be considered in a merger/takeover if awarded to executives.
This paper will discuss the reasons why CEOs are not being overpaid. It will apply the utilitarian ethical principle to many a few aspects to CEO compensation and whether or not it is justifiable for such pay. The paper will look at whether or not their performance is justifiable for the pay because they play such a big role in the livelihood of the company along with the principle agency theory and how it is being addressed for the benefit of the shareholders and others involved with the company, the supply and demand of the CEOs, and the paper will describe the comparison of other professions to help link the idea of CEOs being fairly compensated.
With how low Costco's prices are, there is always speculation to whether Costco compensate their employees too well. Costco’s management team firmly believe that their high compensation of employees is one of their competitive advantages of their company; ultimately, it makes sense that it is high. The Costco team consists of 117,000 full-time employees and 88,000 part-time employees who love their company and are constantly promoting it to everyone that they meet because they are pleased with the company in general and their compensation. The company believes that its employees should have the right to receive good wages and good careers. This results in high retention and a low turnover rate. This kind of practice has resulted in a very low
Blau, F., & Kahn, L. (2007). The Gender Pay Gap: Have Women Gone as far as they can. Academy of Management Perspectives , 21 (1), 7-23.
Steve's salary while being the CEO of apple was $1 a year. Did you know that? He tried to show and teach his employees that money has no value. Although, he did own the majority of the shares in Apple, and that makes up for his $1 a year salary by A LOT. -- That is besides the point.
Power and Exploitation: Abuse by the Wealthy Are CEOs paid too much? Do the wealthy have unfair power? To put it bluntly, yes. CEOs make ridiculous amounts of money. So much, in fact, that many people have a hard time understanding how much they really have.
We now know a few things about CEOs. Their job is to make their organizations look good, however troubled and ineffective they might be. They do not feel obligated to divulge troubling information that might affect public confidence, cause valuable employees to leave, or make it difficult to recruit in the future.
Holland Enterprises is on an innovative planned trend, to invite and maintain the utmost talented employees and to decrease opportunity. The Human Resource Department had the responsibility that has initiated a winning team with a different compensation strategy. The compensation strategy contains of financial pay, and in thoughtful rights of imports and amenities. Holland Enterprise employer’s duties guarantee that their drivers recognize that they are motivation, they obtain the implements they want to be effective in their employment with Holland Enterprises. Their obligation founds an idea and marks accurate potentials.
I personally have dealt with an imbalance of power when dealing with a previous job I had. The benefits of the job were mainly based on the top employee and how well they did their job, and if they did well enough to get a raise then the whole sales team got a raise as well. I was never sure if that was corporate wide or just the way our sales manager did it,
The board of directors has both executive and non executive directors. Executive directors have both executive and board duties to perform while non executive directors have only board responsibilities. Therefore both types of directors vary in the responsibilities and authority they have in the company affairs. Thus the non executive directors devote very little time to company affairs ( only attend board meetings, committee meetings of which they are members or sometimes pay a visit to the company premises for getting knowledge of how things are done).