The factors that help to explain the rise in executive compensation are organizational size, organizational growth opportunities, and organizational risk. As an organization grows, so does the quality and work of most managers and they need to get paid accordingly. CEOs and executives have the responsibility to look over the organization, complete operations, guide and give advice to their employees, and evaluate the success of their organization in reaching its goals. According to an article that I will reference below, “a fundamental feature of each organization is a future investment opportunity.” With this occurring throughout their business, CEOs’ and executives’ total compensation will consist of a base salary and long-term incentives. Some people think that with greater pay comes greater performance and with more growth opportunities ahead, they’ll risk the extra pay for long-term success. CEOs and executives have a lot of risks that come into play with the positions they are in and of course, with the greater risk involved, they would accept greater compensation. Another one of their responsibilities is to engage in media obligations and public relations which means putting their face in front of the public to represent their business. If it’s a business that succeeds but maybe isn’t as popular with some people, that’s a risk they’re willing to take.
As for the two views on executive compensation, it is valid to have it be appropriate because structures and organizations do run on someone being the leader and others being the follower. In order for a person to have authority, sometimes that comes with money, and there needs to be a system where someone or some people get paid higher in order to motivate and influence others to work just as hard and be productive. It can also not be valid because you don’t need money to have power, you can simply still motivate by having the same pay as everybody else, I guess it’s just what those leaders want to motivate them to keep going. It’s valid for executive compensation to be excessive because I had no clue people were getting paid that much of a difference from their workers, I think it’s a bit much. It doesn’t make sense for others to think they aren’t worth as much as CEOs are. It could not be valid due to the responsibilities and enormous amount of work they put into their jobs. This can speak for many on why they get paid an enormous amount, they are responsible for a lot of things. They keep a business running and they could even have run the business themselves because they came up with the products or the technology, etc.
I honestly have no words or changes that I could make to the executive compensation because I would understand both perspectives on whether they are appropriate or excessive. If there were a couple I had to mention it would be setting up value-based compensation where we know exactly why and what comes with that position for the compensation.
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