Compensation Blog #4

My personal views on executive compensation is that it is excessive. To an extent, I completely understand executive compensation, but not to what it has inflated to today. There are numerous things that stood out to me in the “Executive Pay: The Issues” video, but a few things have really stuck with me. The first thing that amazed me, but also sort of made sense was how most companies want to be in either the top 25% of above average for CEO pay. Since most companies want to do this, the average keeps going up and up which is astronomically raising CEO wages/compensation. Then overall, it was really interesting to hear other people’s perspectives. Especially the former CEO of CBS and his outlook on executive compensation. 

I would change the way executive compensation works. Many executives are making so much money and it doesn’t stop coming. For example, Jeff Bezos could give every Amazon employee, there are millions of them, hundreds of thousands of dollars and still have a lot of money. A lot of executives are making most of their compensation from stock gains, but their base salary is also large. What I would implement is some sort of cap on their compensation. Obviously I wouldn’t have them stop making any money, but some should go back to employees of the company. I believe that executives should be limited somehow compared to the average salaries of their employees. 

There are definitely a few problems that could occur if I made a cap or adjusted executive compensation. It takes most people years, even decades, to get to an executive position. And as the CEO, they are not going to want someone to tell them how much they should make since they are technically the highest position in the company. There could also somehow be a few ethical issues because you can limit the base salary, but since most executive compensation comes from stock options, there aren’t many options to limit that. 

I think that the stock option component of compensation is the most essential to recruit executives and motivate them to lead companies toward competitive advantage. Since stock options can’t really be limited, this would motivate executives to help their companies excel which would also benefit themselves. Base salaries can be capped, but stock options almost seem unlimited.

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