The Relationship Between Executive Compensation And The Sustainable Future Of The Respective Organizations

The Relationship Between Executive Compensation And The Sustainable Future Of The Respective Organizations

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The main objective of this study is to Identify and analyze the relationship between executive compensation and the sustainable future of the respective organizations as a result of granting these compensations. This is considered in a broader scale where not only the company but also the employees and the stakeholders of the company are considered.
Before proceeding into details it is worthy to understand what an Executive compensation is. Executive compensation or executive pay is composed of the financial compensation and other non-financial awards received by an executive from their firm for their service to the organization. Examples are salary, short-term incentives, long-term incentive plans, employee benefits, paid expenses and insurance.
It is important to analyze how these executive payments would help the company, employees and stakeholders as this seems to be a huge expense for a company at any level. By offering these executive payments companies would be able to attract and retain Top-caliber executives who have proven track records. The company image would rise as a result both due to these perks as well as its top management.
With the experience and effective decision making of top executives, the company has greater opportunities for success. Therefore the long term profitability of the company would increase. This ensures the long term sustainability of the company. From an employee perspective this ensures their job security and job satisfaction of working for a successful company. From a stakeholders’ perspective it promises increased rate of returns and increased share prices which could be used to maximize stakeholder wealth.
We can analyze real world examples for this scenario. In 2015 Porsche’s Executi...

... middle of paper ... executive is rewarded if that person has achieved a certain number of volumes of sales. This is more like the concept “Profit Sharing”. However, more senior executives are rewarded based on the overall performance of the company rather than based on their contributions. For an instance a CEO will get a huge bonus if a company meets its profit targets for the year. In both cases, employees get motivated to achieve these objectives and receive the employee compensation they are entitled for. This automatically creates a decisive and a dramatic increase of effectiveness and efficiency of the workforce.
This concept coupled with examples provided earlier would prove that Executive Compensation would create a positive impact on the company. It is not only in monetary terms but also in non financial aspects such as image of the company, work environment and reputation.

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