Executive Compensation

Описание: No modern discussion of compensation is complete without at least touching on the topic of executive compensation practices. Executives drive organizational performance more than any other employees. The great debate over how much chief executive officers (CEOs) matter rages on.

There are many cries in the business world today that executives are getting paid too much. In at least some cases, that certainly appears to be true based on the performance of their companies. But are executives generally paid too much, too little, or about right? In order to even attempt to answer such a question, we need to look at what executives are paid to do.

If we were to ask you if anyone in a company physically produces enough products or services to make $1,000,000 or more in any given year, most of you would answer absolutely not. However, executives are not paid to be production employees; they are paid to make decisions for the organization and to guide it toward its goals. In addition, the decisions that executives are paid to make are not easy decisions. Successful executive leadership requires a high level of inherent intelligence, knowledge, and skills to analyze so much information, as well as significant experience in making decisions of similar types and consequences.

For many years now, executive incentives have been moving toward more long-term options and fewer short-term payments in order to force the executives to look at the health of the firm over many years. While CEO compensation rose every year from 2011 to 2016, corporate boards put more and more emphasis on aligning that pay with shareholder returns over the long term. Even though this is the case, there are still many short-term incentives being used by firms.