The Importance of Networking for Management Graduates and Professionals
Networking for Management Graduates If you are in a business school or college, chances are that networking would be useful to you to make a difference in your eventual career. For instance, networking can be a great method of knowing about how the real world companies work and this is especially important for those business […]
Performance Appraisal – Meaning, Objectives and Advantages
Performance Appraisal is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development. Performance appraisal is generally done in systematic ways which are as follows: The supervisors measure the pay of employees and compare it with targets and plans. The supervisor analyses the factors […]
For those Nearing their Forties: How to Plan for your Second Half of Career and Life ?
If the previous generation was the first to contemplate life after retirement as the Industrial revolution and the birth of modern scientific management meant that employees outlived their organizations. In other words, the baby boomer generation was the first generation to actually contemplate what their lives would be after retiring from the corporate world. This […]
Employee Behaviour – An Overview
There is a certain way individuals behave in a particular situation. No two individuals behave in similar ways. There are individuals who find it difficult to handle stress whereas there are certain individuals who have the ability to face unforeseen circumstances with a smile. Employee behaviour is defined as an employee’s reaction to a particular […]
Critical Features of Competency Based Assessment
When the competency based assessment has been chosen to introduce in the organization, it is worth spending some time in understanding the critical features of the process so that it is used appropriately to achieve the results it intends to achieve. Once, critical competencies are identified and the assessment is to take place for any […]
When one writes about executive compensation, the thought of jet setting CEO’s who enjoy luxurious lifestyles and live in gardened villas at the company’s expense comes to mind.
While the stereotypical image of a CEO enjoying such extravagance is indeed true to a certain extent, there is more to the topic of executive compensation. For instance, the practice in recent years has been to offer generous packages to executives that include stock options, benefits and variable pay over and above the basic components.
The point to note is that executive compensation is as removed from the compensation packages offered to middle and lower tier employees as they are in the hierarchy of companies. The reason for this has been the trend of CEO’s and executives being vested with more responsibilities as well as an emphasis on holding them responsible for top line and bottom line growth.
Among the many causes attributed to the ongoing global financial crisis was the one about flawed incentives and high compensation packages to the executives which resulted in skewed priorities for the executives who were bent on registering profits at any expense and in the process throwing caution to the winds. It was also pointed out that the gap between the compensation of the CEO’s and the lower most employee was in the ratio of 300: 1 for companies like GE (General Electric) and GM (General Motors) where the CEO’s of these companies raked in Millions of Dollars of compensation when compared to the workers who were barely making five digit salaries. This has spurred a debate over the efficacy of paying executives so much when the end result is not commensurate with the pay.
While salary is one part of executive pay, the associated perquisites and benefits that executives are granted by the board of directors is another important aspect. Things like paid vacations, children’s education, preferred neighborhood housing and access to the best clubs and other benefits make the job of executives an aspirational one for many business graduates.
Further, the humungous bonuses offered to the executives (in the range of 100% to 300%) makes one wonder whether the stratospheric levels of executive pay is something that needs a rethink by the collective conscience of the corporate world.
The point that this article is making is that while executive compensation needs to be commensurate with the level of experience, the ability to articulate vision and imbue the organization with a sense of mission and at the same time the capability to take risks, there needs to be a line drawn somewhere which caps the compensation and packages offered to executives at levels that are more earthly. While the intention is certainly not to begrudge the compensation being offered to executives, the incentive system must be more tied in to current market realities as is the case with compensation at other levels. Hence, the lessons learned from the recent financial crisis about asymmetric risk and reward systems must not be forgotten in a hurry.
Your email address will not be published. Required fields are marked *
Corporate Strategies to beat the Downturn: Cutting Slack and Layoffs
February 12, 2025
