The Evolution of Executive Compensation from
The Early 20th Century to Today
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.
The ability to track executive pay began at the beginning of the 1930’s. This is when the Securities and Exchange Commission (SEC) began to require disclosure of executive pay (Fryman 2010). Before this time there is really no clear record of remuneration. In 1953, the Revenue Act determined that “restricted” stock options could be taxed at the much lower rate on capital gains (Fryman 2009). Throughout the 1950s, only about 16 percent of the executives were awarded an option in any given year. The frequency of stock option grants has increased steadily since then (2009). They could pay a 25% tax rate on stocks versus a 70 to 90% rate on labor income (2009). The obvious thing to do would be to take the stock options.
For the most part, the value of compensation from the time of World War II (mid 1930’s – 1945) until the 1970’s did not change (Fryman 2009). Many executives are on a Pay-to-perform compensation plan. The most surprising fact is during the 1950’s ...
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... a tough time. When considering the amount an executive should receive, the well-being of the company as well as all of its stakeholders should be considered.
Work Cited
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Frydman, C. (2009). Learning from the Past: Trends in Executive Compensation over the 20th Century. Cesifo Economic Studies, 55(3-4), 458-481.
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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
...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)
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CEO compensations are awards and incentives given to the chief executive officers of companies. These awards could either be in the form of cash or in non-monetary forms. For instance, some executives are awarded huge numbers of shares in a company or are allowed to purchase the shares on their own but at subsidized prices. The sum of reimbursement on compensation to any chief executive officer is decided on by the board of directors to that particular company (Sam Ashe-Edmunds, 2014). The last few decades have seen dramatic and outrageous rises in executive compensations. Currently, the amount of money paid to CEOs as compensation is close to two hundred times the amount CEOS were receiving in the 70s (WAGNER, 2012).
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Not only that but, believe that it is so awesome what Chief Executive Officer Amos, is allowing stockholders to vote on the pay package can include salary, bonus, stock options, and deferred compensation. There are not many top level managers that would put their livelihood in the hand of others. To me this speaks volumes about his leadership.
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.
Weisbach, M. S. (2007). Optimal Executive Compensation versus Managerial Power: A Review of Lucian Bebchuk and Jesse Fried’s Pay without Performance: The Unfulfilled Promise of Executive Compensation. Journal of Economic Literature. 45:419-428
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