Author: Kolby Taylor

When thinking about the question of is executive compensation excessive or appropriate? I immediately knew what my answer was going to be. After I thought about the question more and looked up some different information I still believe that the executive pay is appropriate. Yes I can see the enormous pay gap that has grown and continues to between the compensation a average employee receives and the CEO of a company. Just like in the PBS segment on executive emphasizes the point of the pay gap that exists.

When looking at the PBS segment that is slightly outdated being done back in 2002 it discussed and displayed a chart of the CEO Pay: Worker Pay change over the years. In 1973 CEO were paid 45 to. In 1991 CEO were paid 140 to 1. When the video was made in 2002 CEO made 200 to 1 to the average worker pay. I am sure now in 2021 this gap is even larger. Example’s of Dennis Kozlowski from Tyco from 1999 to 2001 made $332 million as the CEO and potential made 600 million allegedly redirected for his personal use. Another even larger example of Oracles Larry Ellison made $795 million is this same time period with $706 being made in 2001 alone. Yes if you are thinking what I am thinking this is a lot of money for these CEO’s to be making. This make bring about the question on how this is fair wile a majority of employees are making enough to live paycheck to paycheck. These CEO’s took advantage of selling stock options before the companies went down. In the PBS segment it is shared that it is a great idea to have people like a Bill Gates that make a lot more money then everyone else. Reasonings being it will motivate everybody else to work harder and be more productive which will create more jobs and create a more vibrant economy along with much more.

Though a man named Rakesh Khurana from Harvard was dubious of CEO’s being able to make all this extra money relative to other general employees. He does make a valid point of how corporate America has been preaching les hierarchy and more shared responsibility but CEO’s continue to make more and more money. I believe it is possible to try and make an argument for any controversial topic like this one. On whether or not executive compensation is excessive or appropriate.

I absolutely believe that the way executives are being paid is appropriate. I believe that CEO’s are the head of a company and if they are able to run a company so successfully than they deserve to reep the reward. It is difficult to run a business and especially keep it sustainable and reach those type of numbers. If it was easy everyone would run and business and make big money right!? In any industry people try to run their own business and start it up and may have some success but to maintain that is even tougher. CEO’s and people in these high positions should not have to miss out on the opportunity. Also it takes a lot of hard work and time to even have the chance to reach a job at this level. Like the video talks about I also believe that by having these jobs it makes people work harder and if they want to have a shot at being the big boss and be a CEO making the big bucks they need to work for it. Everyone needs a goal to work to and even though they might not make it to CEO they can still work like they are trying to get there. Also another reason why it is appropriate for executives to be compensated so well is at the end of the day everything falls on the CEO and the executives. They are faced with making the biggest and toughest decisions moving forward and with that responsibility should come a bigger reward. For example dealing with Covid – 19 has been tough to manage for every industry and no one was trained on how to deal with a pandemic like this. Do I beleive that the average empoyee should be compensated more when a company can afford too yes they should. But CEO’s should not have to take away from their pay to pay employees more in my opinion.

The component of compensation as to what is most essential to recruit executives and motivate them to lead companies toward competitive advantage is that their pay should be based on profits of the company and not based on the size of the company. It should not matter how large the company is to determine the pay structure it should be determined by the performance of the company it self. When recruiting executives you need to make this know especially being a smaller firm. You can say hey I know we are smaller but you can make just as much money here he larger companies if not more if you work for it. Your compensation is all based on the performance of the company. Making it attractive and you need to give the CEO the power to make the decisions and run their system. If not then the job will be less attractive because CEO’s and executives will be controlled in some type of way and want to be let loose. In doing these things will give a company a competitive advantage by being able to get the best leaders for it’s company as possible even though they might be the smaller firm or whatever the case might be. It allows for the potential of growth moving forward.

Companies are constantly faced with decisions on what they should offer for its discretionary benefits for its employees. These decisions are tough because funds necessary to keep up the benefits become more and more costly each year. Discretionary benefits are put into three categories that include protection programs, paid time off, and services. Protection programs involve disability insurance, life insurance, and retirement. These protection programs don’t do much at the time you are working but when needed at some point later on they are very valuable. Paid time off allows for employees to have a good work and life balance by being compensated while not being at work. The last category includes services like employee and family assistance, tuition reimbursement, and even transportation services. These service discretionary benefits seem like extra luxury benefits.

So after some background information about the three categories of discretionary benefits I truly believe it is pretty clear and obvious on which benefits need to be first eliminated and lastly eliminated. The category of service benefits needs to be the eliminated first because it is all really nice to have but none of it is needed. It’s a really nice gesture to provide family assistance for employees for families that are struggling but a company that is in a tough financial situation doesn’t need to be spending money on this. There is many more important areas the money can be and should be going The 2nd category of discretionary benefits that should be eliminated is the paid time off. Yes having a work and life balance is important but not a must have for a company that is struggling with funds. Paying employees for time they are not working is nice for the employee but as for a company it is costly. The last category to be eliminated would be the protection programs. In my opinion these are really what matters. If something happens to you and lets say you become disabled those few days of PTO will not even be of interest anymore. You will want to have that disability so you can still support your family. Yes you may go years and years and never need the disability insurance and PTO and other benefits may sound much more attractive. At the end of the the protective programs are much more important. For a company they should look to preserve its discretionary benefits in this order when funds are limited and benefit areas need to be dropped.

When I think about a person focused pay structure I think of a skill based pay (SBP) compensation system. I have a very large background in the sports world and could not look at the National Football League as a prime example of a SBP. In this type of structure it has been taught that the pay is determined by that persons characteristics or skillset from our classes learning materials. Rather than just the job itself. I use the NFL as example because its players are paid based on their skillset and athletic capabilities. The higher skilled the athlete the more they are generally paid. A good way to measure this is based on production and statistic the individual athlete produces. For example before this NFL season the Kansas City Chiefs Quarterback Patrick Mahomes signed a $500 million dollar contract. Becoming the highest paid football player in history because of many factors. He has been able to put of some amazing production, winning lots of games and even the super bowl. Doing all of this and at an early age has made this contract possible for himself. The contract is paying him for what he has already done and for what he can do in the future. In essence saying hey you are doing great and please keep it up and we want to reward you for your work and kind of bribe you to keep it up. He was able to set his own salary and if the Chiefs refused to offer him this deal another NFL team could and the Chiefs could lose their most important player. If another pay structure was used it just wouldn’t work. The athletes who are the employees would more than likely not support the idea. For the most part to get top level football played and win you need to pay based on skillsets. This is not like paying a cashier who you can easily be replaced and receive the same production. A cashier has no leverage to demand more pay. Where a NFL quarterback can because its like saying good luck finding someone to do what Patrick can because you probably wont. Now the players benefit from this greatly but the NFL would make even more money then it already does if they could just set a pay structure and the players had no option. Though if this was the case it would not make football what it is today.

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