Before watching any of the videos or lectures, I always viewed executive compensation as extreme for multiple reasons, and the video “Executive Pay: The Issues” further solidified that. It came down to the fact that CEOs (in 2007) were making 500 times more than their employees. The video also captures some of the issues perfectly. For example, when a company has a bad year/quarter, the employees pay for it, not the CEO.
In the jamb board, I said, “having how companies perform part of their pay. If the company isn’t doing well, it affects the CEO. And has employees rate the CEO’s performance”. This can also apply to stocks. For example, when a company has a bad quarter, a CEO’s stocks can take away before the CEO has a chance to sell.
However, there are multiple issues when thinking about decreasing an executive’s pay. “Corporate America” has gotten used to always trying to one-up each other when paying their CEOs. In “Executive Pay: The Issues” talks about how 2/3 of the corporations want to pay above market pay while 1/3 of the corporations want to be 25%. This comes to be a game to see who can all one-up each other. If the board of directors decides to decrease a CEO’s compensation, they’ll just move onto another company that can offer them more and not be punished. Thus, creating a market that favors any working CEO.
When looking at how to recruit CEOs, there are multiple things you consider. I believe one thing CEOs look into is stock options. Since, in most, they’re not reported, it’s easier to skate by. While a base salary works for some, CEOs are more interested in the perks and benefits that come along with it. That could be retirement/life insurance plans, health care, and free use of company property. It’s important to know where you stand in the compensation pay with your competitors. While you can compare yourself with other industries, your competitors are the ones you want to beat. If you believe your CEOs are the best in the industry, you will want to pay them however they want to keep the talent where it is.
Executive Pay: The Issues: December 2, 2002. Anonymous NewsHour Productions, 2002. https://video.alexanderstreet.com/watch/executive-pay-the-issues-december-2-2002.
