Executive compensation is a very touchy subject and with it comes a lot of different opinions. Personally, I think that the value CEOs bring to a company is astronomical and can be hard to put into words because their duties and responsibilities may not be clear-cut. With that being said, compensating these CEOs is equally as difficult and I think that the amount they are being paid reflects the work they are putting into the company. As stated in the video “Executive Pay” Bob Pavey says that “you need one or two people who make incredible amounts of money and motivates everybody else to work longer and to be more productive, and to create more jobs and to create a more vibrant economy” and unfortunately, money is an extremely motivating tool and can truly push people to produce quality work at higher levels so that they can attain the proper monetary compensation. So, why wouldn’t the CEOs be compensated in that way? Competition between companies and leaders of those companies can produce great business and drive our economy in a positive direction. Even if what CEOs do to bring their company success doesn’t seem like a lot, there is so much that isn’t seen that takes YEARS of preparation and consulting even if the results are only seen for a few months.
Some factors that explain the rise in executive compensation start with the changing structure of how executives are being paid. Instead of strict salary increases, executives are being given the opportunity to purchase stock options and other long-term incentives as Joesph Bachelder stated in the video. This is just another form of monetary compensation and can be given to those CEOs who may have helped launch their companies with IPOs or bring them into profitability and these stock options may be an easier way to compensate those executives instead of bonuses or pay increases. Another reason that the pay increase may seem so drastic is that most companies want to set their executive pay scales at, or above-average which can increase pay rapidly within a few years as markets grow and executive roles shift. Graef Crystal also shows that with the new age of information (since this video is from 2002) there is an increase in the amount of information readily available. Much like how competition between CEOs is changing, being able to see how much your rival is making can greatly change the amount of compensation one feels comfortable asking for.
The only major change I would want to see in the compensation of executives is to make sure that every executive is compensated at a fair wage for the industry they are in. If you are the CEO of a technology company you should be getting compensated in a way that is fair to the wages in the industry and the same goes for the size and number of employees the company has. By setting this system up on a scale, executives can be compensated as much as they should be without skewing the market. With the responsibility of an executive position also comes a great deal of risk which is why the chance to compensate those who are putting a lot on the line should happen.
Resources:
Public Broadcasting Service (Producer), & . (2002, -12-02). Executive Pay: The Issues: December 2, 2002. [Video/DVD] NewsHour Productions. https://video.alexanderstreet.com/watch/executive-pay-the-issues-december-2-2002
Week 9 Lecture: Compensating Special Groups
Martocchio, J. J. (2017). Strategic Compensation: A Human Resource Management Approach (Ninth edition.). Pearson.
