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 ... ... middle of paper ... ... 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 Dew-Becker, I. (2009). How Much Sunlight Does It Take to Disinfect a Boardroom? A Short History of Executive Compensation Regulation in America. Cesifo Economic Studies, 55(3-4), 434-457. Friske, D., Lippincott, T. (17 April 2014). General Format. Retrieved from http://www.towerswatson.com/en/Insights/Newsletters/Global/executive-pay-matters/2014/The-Next-Stage-in-Executive-Compensations-Evolution Frydman, C. (2009). Learning from the Past: Trends in Executive Compensation over the 20th Century. Cesifo Economic Studies, 55(3-4), 458-481. Frydman, C., & Saks, R. E. (2010). Executive Compensation: A New View from a Long-Term Perspective, 1936-2005. Review Of Financial Studies, 23(5), 2099-2138.
...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)
Graham, M. D., Roth, T. A., & Dugan, D. (2008). Effective executive compensation: Creating a total rewards strategy for executives. New York: AMACOM/American Management Association.
Whenever compensation is high, the lower the profits and accumulated assets associated with the value of the company. In this report, the literature review will further tell you the private and public sector differences and the factors associated with each sector, the elements of executive compensation vs. value. The gap in the literature is why employee compensation differs from executive compensation, determining reasonable executive compensation or business value, and the determinant of executive compensation in private firms. The methodology report will show how relative performance information (RPI) on feedback from employee performance when incentives are rewarding (Tafkov, 2009).... ...
Evans, J. D., & Hefner, F. (2009). Business ethics and the decision to adopt golden parachute contracts: Empirical evidence of concern for all stakeholders. Journal of Business Ethics, 86(1), 65-79. doi:http://dx.doi.org/10.1007/s10551-008-9818-9
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.
CEO compensation has been a heated debate for many years recently, and it can be argued that they are either overpaid or that there payment is justified by the amount of work they do and their performance. To answer the question about whether CEO compensation is justified it must be looked at by the utilitarian viewpoint where the good of many outweighs the good of one. It is true that many CEO’s are paid an exorbitant amount of money; however, their payment is justified by the amount of money that they bring back to the company and the shareholders. There are many factors that impact the pay that the CEO receives according to Shah et.al CEO compensation relies on more than just the performance of the CEO, there are a number of factors that play a rule in the compensation of the CEO including the fellow people who help govern the corporation (Board of Directors, Audit Committee), the size of the company, and the performance that the CEO accomplishes (2009). In this paper the focus will be on the performace aspect of the CEO.
Namely, it depends upon how the executive’s compensation package is compiled. Therefore, if executive compensation is based solely on performance then there is a real danger of reducing the social values of the executive (Ims, Pedersen, & Zsolnai, 2014). Thus, compensation must “go beyond traditional economic rationality in which employees and organizations are mainly perceived as instruments to produce increased profits and financial wealth” (Ims et al., 2014, p.
In recent decades, share-based compensation has been increasingly used as a part of employee compensation. According to a survey conducted by SSR regarding the share-based compensation for companies in the S&P 500 index, the charts above shows that share-based compensation expense as a percentage of both selling, general and administrative expenses and total revenue increase substantially from 2005 to 2010. One of the main reasons is the changes in international accounting standard, which require all public companies to record share-based compensation expense on their income statement or balance sheet if settled in cash. Besides, the increasing trend also tells that there are several positive impacts of adopting the share-based compensation by those companies.
Executive compensation has been a commonly debated topic in many different nations around the world. Most of these discussions focus around the staggering rise in compensation over the last couple of decades, most evident in the United States and more specifically, in the financial industry. This issue was brought to light during the housing market crash in 2008, when a lack of regulation in the financial securities market led to the exposure and critique of several large investment banks. Through investigational probes, it was found that not only was executive compensation exorbitantly high, but executives were also acting both unethically and immorally. Even after this information surfaced, many executives left their roles with large payouts
A growing list of empirical literature has attempted to investigate whether CEOs remunerations are related to the size of the firm and their performance and if corporate governance mechanisms have any significant influence on CEO remuneration. Undoubtedly the most documented association in the Executive remuneration literature is the rapport between CEO pay and firm size. CEOs of big companies are paid more. This is normally justified by the complexity of jobs performed by executive officers of large firm (Murphy, 1999). Specifically, more recent studies such as Smith and Watts (1992) and Rosen (1982) argue that CEOs of big companies need talented and competent managers with capacity and experience to perform very complex tasks because they
This report explores the issue of the pay that top executives make, and the reasons why they do. It also suggests improvements that can be made to make the system better. High Pay Seems Small When Compared To Company Profits Many companies pull in profits that are extremely high. When an employee of such a companies salary is compared to the amount of profit that the company earns, it starts to seem reasonable. It only makes sense that if the employee is directly responsible for the success of their company, then they deserve to get their payback. It seems ironic, but many salaries even look small once compared with a companies profits. Top Executives Are Under A Lot Of Pressure Being the CEO of a company is not an easy job. There is all kinds of pressure for a person in such a position to succeed. If they do not, then it is their job on the line. Therefore, they deserve to receive a large sum of money for the work that they do. It is the only way to compensate these employees for the tremendous strain that their job puts on them. It is essential that the employees get paid the amount of money that they deserve. Pay Should Reflect Performance When CEOs are being given big paychecks, they are expected to perform at a high level. There success is impeccable. However, this does not always happen. There should be some way of connecting pay to job performance. The best way of doing this would be to award bonuses to those workers who are at the top of their class. This would not only motivate workers to do a good job, but also reward the employees that do succeed.
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
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...
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).
Organizations are working hard in today’s world of business, not only to remain competitive, but also to focus on stability and structure. Employees are the backbone of an organization. It is becoming more important to offer quality HRM programs to staff, in order to support the retention of trained and experienced staff. Employees have always been concerned with salary however, there is a new focus emerging that looks at compensation as a whole entity. Monetary wages are now just as important as other benefits such as paid time off, medical and dental offerings and retirement. This paper will discuss the importance of the total compensation program which includes many aspects, not just salary. Attention must be paid to equal pay, pay