Executive Compensation is a very interesting topic, some individuals may say that it is excessive while others think that it is appropriate. In my opinion, I believe that executive compensation is appropriate yet sometimes can seem excessive when you compare their salaries to an average worker. Companies often have to offer competitive packages in order to recruit the best talent on the market to run their business. CEO’s also obtain a ton of knowledge and leadership and should be compensated appropriately for that. But where I find it excessive, is when the income disparities between the average workers and the CEO’s is brought to light. As stated in our textbook “the typical CEO’s annual salary plus bonus was nearly 180 times greater than the typical fast food cook’s annual pay and approximately 15 times greater than the typical anesthesiologist’s annual pay” (272) While it makes sense that CEO’s who have an immense amount of leadership and knowledge make more than the typical fast food cook, it is concerning to see the difference and income disparities.
If the executive compensation packages were decreased or limited, I believe that some individuals would not be very happy. Many people work very hard to obtain these leadership roles and believe that they are worthy of the income they are receiving. If you were to limit the pay and overall package, it might create an issue where not enough people are wanting to step up into these leadership roles because there isn’t proper compensation in their eyes. By offering the competitive compensation packages, it creates motivation for individuals to work their way up and obtain the role of CEO.
The component that I believe is essential to recruiting executives and motivating them to lead companies towards a competitive advantage is their equity agreements. By creating an incentivizing equity agreement it promotes a sense of ownership within the company for the executive. As the company is performing well, the stock value will generally increase. This will help to motivate the CEO to lead their company towards excellent performance.
