Understanding Compensation at the Corporate Level

Understanding Compensation at the Corporate Level

Compensation

The compensation can be related to the structure of the business and the recruitment of employees, their retention, motivation, satisfaction, feedback and is considered as the potential employees when searching for employment. The compensation for the employees can be considered as the way in which they are valued instead of the way in which they are paid (Bognanno, 2010).

Executive's Compensation

The compensation for the top executives can be defined as the addition of basic pay, stock grants, bonuses, stock options and all other types of benefits and compensation. If all these compensations are considered, then it can be said that stock grants are the largest part of the executive's compensation. Since the fivefold increase in the stock options produced median total compensation of the CEO for the period 1992 to 2000, the inflation-adjustment was near to triple. In the era of 70's the pay of average CEO was 30 times greater than the average worker of the company but it is important to note that this figure rise to almost 90 percent for the cash compensation of the CEO that includes salary and bonuses. In terms of total cash compensation which includes grants, cash compensation, and stock options, the CEO of the company get 360 times more as compared to the average worker. The compensation packages of the US CEO's is much more comparing to the CEO's package of the UK, and this is the reason that the most paid CEO of the UK come on the 97th number of US highest paid CEO's. Moreover, it has been observed in the year 1997 that the CEO of Disney Land exercise options was more than the combined compensation of the UK's top 500 CEO's. There has been a comprehensive debate regarding the increase in the compensation packages of the CEO's that whether these packages are justifying their performance or it is only the managerial power of these CEO's that they are given such high compensation packages. The CEO compensation is normally seen within the framework of the agency and the division that lies between the managers and owners in the organizations give rise to the agency issues in which managers are seen to priority to their compensation packages over the interests of the stakeholders. The rise in the different elements of pay is linked to the performance of the firm and the best example is the stock options in which a mechanism is produced that align the incentives of the managers with the stakeholders of the firm (Kristie, 2005).

The top managers or the top level management of the organizations are also known as the senior executives or management and these executives are given different title in the organization such as chief executive officer, chief operating officer, chief financial officer, corporate head, vice president etc. Most of the times, this top management of the company make decisions related to the compensation of the employees and they are the one responsible for affecting ...