COMPENSATION PLAN

Compensation Plans for Private Sector CEO's in North America

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Compensation Plans for Private Sector CEO's in North America

Thesis Statement

“Compensation plans for private sector CEO's in North America are reasonable and justified”.

Introduction

A very popular saying goes like: “You get what you pay for”. It is absolutely appropriate in case of the consumer world. One must pay to get the sound quality. Same is the case with employers. Top quality personnel work at an exorbitant price. If an organization requires effective policy, its implementation and a competitive institution that works in the best interest of society and the firm, it need well educated, well trained, professional and highly motivated individuals.

In case of public service also, compensation packages must be competitive with the private sector to attract and retain high quality personnel. However, at the moment, salary of public sector officials is not in the least competitive. Extensive research was done in this regard to compare compensation given to the private sector and public sector employees.

In general, public sector employees at a low grade earn more than private companies employees at low and middle level management. Government employees earn approximately 5 to 10 percent more than non-government employees. However, these findings are opposite in case of senior level positions, which earns less than private sector provided comparable positions are analyzed. As per an estimate, the federal Deputy Minister of Finance, one of the senior public servants, earns twenty four times less than CEO of Canada's five leading banks. The highest paid CEO of a private bank earned eighty six times more. The federal Finance minister is the bearer of one of the highest level positions in the public sector and is also the bureaucratic head of Finance in Canada. This individual has a huge and complex department under him which is accountable for very crucial things. His work responsibilities include the federal budget, administering major federal transfers to the provinces and territories and preparing tax and tariff legislation. Keeping in mind the nature of this position, it is fair to compare it to CEOs of large corporations.

A very relevant example in this regard is the comparison of the Deputy Minister of Finance to CEOs of Canada's leading banks. As per the salary structure of 2005 for federal deputy ministers, the Deputy Finance Minister can earn a maximum salary around $341,000. Maybe it sounds much, but it is nothing in comparison to the money made by bank CEOs in 2005. The average salary made by the big five banks is $14,875,000 whereas the CEO of CIBC alone made $29,471,000 (Gartner, 2007). Now the question here is: Is this so very lucrative compensation plans for private sector CEO's in North America are reasonable and required? This paper present arguments in favor of the thesis statement.

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