Company Case Study : Compensation Package Essays

Company Case Study : Compensation Package Essays

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When a company hires a new Chief Executive Officer (CEO), the company must decide how to compensate the CEO. There are many ways of compensating CEOs, and they all have advantages and disadvantages. These can include things such as salaries, stock options, bonuses, and other benefits. How the company decides to arrange all the things for its CEO can be very crucial to the company’s success. One of the most interesting decision the company must make is whether to give its CEO a golden parachute, and what the company decides to offer as a compensation package, can be one of the most important decision the board of a company makes.

Compensation packages are one of the biggest reasons a CEO would choose one job over a different job. Most CEOs, and people in general, want to make the most possible money from their job, so they will choose the job that allows for that. This means that for a company to get the best CEO, which in theory would mean the company would be the most profitable, the company needs to have the best compensation package. However, having a compensation package that is too high is also not good because it wastes money and may have negative effects on the company.

A salary is probably the most common compensation a CEO receives, and it is the simplest. Other common compensations include health insurance, retirement plans, and stock options. The first two are simple and shouldn’t vary all that much between companies. However, stock options can vary a lot between companies, and can be one of the biggest benefits to a CEO. Anything that ties a CEO’s compensation to the company’s performance is a good thing because, in general, a CEO will care more about how the company is doing if his or her compensation is tied to ...

... middle of paper ... get a good CEO, but he or she may not be as motivated because he or she will be compensated the same no matter how well the company is doing.

The key to deciding a CEO’s compensation is balance. A company needs to balance performance based benefits with a good salary. However, being more toward the performance side is usually best. The reason for that is it makes the CEO more motivated, and since compensation is based on performance, if the company is doing bad, it will not have to break its self to pay its failing CEO. As for golden parachutes, they are probably not the best because in a way they pay a CEO to fire him or herself which is just a backwards concept. However, in some sectors where mergers are common, they are pretty much required to get a good CEO. Overall, a reasonable well balanced compensation that is in line with industry standards is the best.

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