CEO PAY

The Three Phases of CEO Pay



The Three Phases of CEO Pay

Introduction

Few issues in the history of modern society have attracted the attention to the executive compensation in the United States companies. Once the relative obscurity has banned the business magazines executive pay is an international issue, debated in Congress and shows routinely featured in the front-page headlines, cover stories and TV news. Several factors are inextricably linked, contributed to the widespread interest in executive pay. First, the undisputed escalation in Chief Executive Officer (CEO) compensation: as in Figure 1, to pay the median income for a cash payment to S & P 500 CEOs show more than doubled has not changed since 1970 (in 1996-constant dollars), and the Median total realized compensation (including gains from the exercise of stock options) has nearly quadrupled. Second, the populist attack on wealth, the so-called "excesses of the 1980s," with the perception that high CEO salaries coupled layoffs are connected, plant closures, downsizing and corporate.

Third, the bull market of the 1990s, creating windfalls for CEOs whose pay is becoming the company's share price is bound. It has also been an explosion in academic research on executive compensation. As shown in Figure 1 were, CEO pay research has grown even faster than CEO paychecks exploding 1-2 papers per year before 1985 to sixty papers 1995. Only a handful of studies of executive compensation in 1980. Most early studies focused on whether paid is more tied to company or corporate income, proves to be the answer, both relatively uninteresting and hopelessly in multicollinearity problems.

Beginning

The compensation is one of the tools to recruit the company and allow holding top-level employees. The challenge of the employer's face is to create a fair and equitable compensation plan that the company is willing to pay and able, for these top-level talent. Executive Compensation, Sales Compensation (Base Pay plus Commission), salary, and hourly wages are several methods of compensation are generally used by businesses. Each method can have different effects on employees and organizations(Abowd, 1990).

Senior executive positions as Chief Executive Officers, Presidents, Directors Board, Chief Financial Officer and Chief Information Officers desire more than a high salary, many are looking for additional incentives such as additional company stock options, flexible working hours, or deferred compensation, the plan would shift taxation of a employee's first contribution. Performance incentives should be based on the performance of the department or company that manages to bind an Executive. Additional shares, cash bonuses or extra vacation hours can persuade to join an executive and remain with an organization.

Sales performance is the key element to success in any profit-based organization. A sound sales compensation package allows the organization marketing activities into the desired results focus, and reward those results with compensation tied directly to the level of performance. A typical sales compensation plan includes a basic salary, Commission-based incentives linked short-term goals, and possibly annual incentives for workers to achieve their individual and corporate strategic objectives reward.

Benefits are paid within an organization is another form ...