...assignment is “CEOs are paid too much”. There are more than a few arguments about the CEO salary over the years. It is clear that CEOs earn more or huge amounts of salaries compared to most leaders globally. Some people argue that it is not fair for CEOs to earn these amounts because it affects the financial system of a country or the world. This people argue that CEOs perform less work compared to the wages they earn annually (Murphy, 2006). My position regarding to the topic is different from Bush argument that stated “CEOs earn too much compared to their performance”. CEOs earning too much is significant because they are the leaders of organizations. (Lorsch, 2012). The audience should understand why CEOs deserve great salary than what they get. CEOs deserve 300 times what the average employees earn. One of the major imperative reasons that CEOs should earn 300 times than employees is due to their contributions in their organizations. “The growth and development of most organization have been influenced by the repetitive performance of CEOs” (Lorsch, 2012). This is one of the major phrase that the audience should understand about CEOs and the reason why they deserve a great salary. My intention to John and the former President of America, Bush is to make them understand the significance of CEOs to earn great salaries. However, there many factors that may deny my argument from being agreed by Bush and John. The audience will not agree with the claim “CEOs salaries do not affect...
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...4,8 million €. It is the amount of money that Maurice Lévy, CEO of Publicis Groupe (3rd communication group in the world), received as part of his annual compensation in 2012 . Only a part, as stock options and other bonuses were, of course, not considered in the calculation of this impressive salary. This is just an example of one of the top compensated CEOs today in France. Are this high wages justified? This debate causes many reactions, especially in a period of difficult economic and social context in developed countries. Whereas important CEOs are able to ask themselves where to spend their next holidays, most workers remain concerned by being able to pay their bills at the end of the month. This inequality leads us to reflection. In my opinion, this inequality is proportionally unjustified. Showing the huge gap between CEOs’ and workers’ average wage wouldn’t be enough to prove the irrelevancy in today’s top executives’ salary calculation. This is why I will introduce various concepts and go more deeply in the analysis of my point of view. We should consider one of the principles usually used to justify CEOs’ compensation: the desert view. This concept emphasizes the fact that top executives deserve the money they make considering their competences, efforts and high responsibilities. It would be extremely hard to prove that a CEO sits at his position without having valuable business competences and experiences, especially as he is chosen by a board of administrators...
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...find the widening difference between the salaries of corporate executives and regular workers to be just or unjust? This continuing widening is unjust because more money is going towards the CEOs who may or may not deserve it. Let's go more into the present and look at how many immigrant workers have came to the US since the 80s. Low skilled workers are so much easier to find and pay less than the "average American worker" (as shown by skew income data). I feel this way because "CEO pay has no correlation with either performance or market capitalization" (Obermatt). The gap continues to increase although education or performance does not play part in the growing wages which makes absolutely no sense to me but I'm not the one appointed to put them in the top 25% of the salary range. In 1980, a CEO made 35 times as much as a worker. This increased by 185 times in 2009, although the company may not have been this hugely successful. Our corporations today can easily lay off workers and cut back salaries because workers in china would accept half as much pay as a worker here, for example, the effect being the lack of jobs and more money aimed towards CEOs. The gap should not be getting bigger this rapidly because there isn't as much money to fund the CEOs salaries, but there still is this "excess pay"(Obermatt). Just because there have been income gains in lower areas doesn't mean the gap should continue to grow between these areas and CEOs. Findings show consumption inequality...
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...Samstag, 6. September 2014 13:30 Session 9 Prep Topic: CEO compensation Reading • Résumé Pedro Matos, Darden Professor • Chapter 7 in Corporate Governance • Chapter 7 in Boards That Deliver • Bargain Bosses, American chief executives are not overpaid, The Economist • How to get paid like a U.S. CEO, Fortune • Executive Compensation Corporate Governance: Chapter 7 - CEO Compensation • Norms for CEO compensation ○ Proxy statements provide information on executive compensation and are distributed ahead of shareholder meetings ○ There is a positive correlation between firm size and total CEO compensation ○ The higher the CEO total compensation, the larger the percentage of non-cash compensation (bonus) • The Goal of executive compensation • What is good performance? ○ Current circumstances, its goals and the execution of its strategies ○ Compensation should include short- and long-term plans ○ Long-term: achieving strategic goals (e.g. financial) ○ Compensation/performance should be benchmarked against peers • Building a compensation plan ○ Peer comparison is the beginning, but should not be the only determinant of CEO compensation ○ Gradual rise of CEO compensation is due to the matching with competitive compensation as soon as one competitor increases compensation • Compensation mix ○ Base salary Have average base salaries with at-risk copmensation when performance is superior ○ Fringe Benefits 30-50% of base salary Medical and life insurance premiums, retirement costs...
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...individuals on the Board of Directors that agree with the salary of Mr. James. Some may argue that he is in fact worth every penny that he is paid and it is a salary well earned. Fallacies There were a number of fallacies identified by HR in the communication to the Board of Directors. The three fallacies were Mr. James’ personal wealth, the family relation to the PDQ founder and the negative attitude towards the town and other employees that were expressed by M. James. The mentioning of Mr. James own personal wealth was used to distract the Board from the issues at hand. The HR Department used an article published by two Wharton professors as a way to sway the argument. The memo notes that Mr. James is the only grandson of the PDQ founder and that he himself stands to inherit the company one day. This ties in closely with the personal wealth fallacy, in that Mr. James does not need this job because he is already quite wealthy, and will be even more so one day in the future. Finally, Mr. James exemplified a negative attitude towards the...
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...financial officers, chief executive officer, upper level managers and the company president. Executive compensation mostly consists of base salary, bonuses, long-term incentives benefits, and prerequisites whose main purpose is to motivate the executives to steer the company to profitability and make decisions with the best interest of the organization. Executive compensation has been on an upward rise especially within the last few decades reaching to unprecedented levels. Worse still, executive employees’ salaries and benefits have increased at a significantly higher rate as compared to other employee’s compensation consequently raising controversy not only of the ethical issues but on issues of equity and efficacy of the high compensation in motivating the executive’s performance. The paper thus posits that the increased executive salaries are not only unethical but are not a reflection of executive performance nor are they correlated to executives performance and as such other options of motivating executive employees should be explored. Other employee motivations such as through psychological contract, organization motivation and employee development should be sought especially with the increased use of teams in management in volatile environment. Types of executive compensation Executive compensation consists of the base salary, bonuses, and long-term-incentives such as...
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...matched these specific items. Depending on the zone I was interested in, I was a good match for an HR Manager, or a CEO position. I think that the CEO position may be a great job for someone, but not for me. The HR Manager position is more of a job that would appeal to me. I do not think that as a CEO I would have enough interaction with the front line employee, these is more of my likening, as the HR Manager I would be prone to meet those needs. I do not mind being in the office for most of my daily chores, but I would much rather get out on the floor and talk to the employees, I do not see this happening as the CEO, or not as much as the HR Manager. According to the O*NET website the CEO position offered above average opportunities in Minnesota, Kansas, and Illinois, this is only three out of quite a few other states. I was surprised at the location of the above average locations, I thought that there would be higher opportunities on the West Coast or East Coast for this position rather than the Midwest? The average salary for this position was pretty good though, $171,000. The HR Manager only offered above average opportunities in three states, they were the state of Washington, Minnesota, and New York. This information was surprising also, however I thought that there would be a higher opportunity in more states. I also thought that the average salary was pretty good also, $100,000, higher than I thought it was for this position. The O*NET website is a very interesting...
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...computer or server space, be able to open your do-file, hit a button, and have a log file generated showing the results for all questions. Homework assignments may be done in groups of up to 4 people, but each group member must turn in their own individual copy of their do-file and log-file. Please list the members of your group at the top of your do-file. Part 1 Using the two provided data sets “CEO_Salary.dta” and “CEO_Sex.dta” located on Moodle, complete this part of the task. 1. What is the 95th percentile of salary? 2. What are the 5 lowest salaries in the data set? 3. Create a new variable, the natural log of salary, and find its mean 4. Create and present a tab of a new variable (named industrytype) that indicates what industry the CEO is from. This variable will be of a string type because the values will be text and equal to either “ind”, “fin”, “cons”, or “util” depending on what industry the CEO is from. 5. What is the mean of salary of males? Of females? Part 2 In this part, you will download publicly available data from the American Consumer Survey. Go to IPUMS at https://www.ipums.org/ and choose IPUMS-USA. Click on IPUMS Registration under the Data section, and apply for access. It may take up to 24 hours to receive account verification. Once you are registered and logged into IPUMS, get back to the IPUMS-USA page. Choose the “Select Data” link which may be on the top banner or on a side-menu. First, select only the 2012 sample. Second...
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...2: Issues of CEO pay that managers need to understand. CEO Pay Overview It seems as though no matter how bad the economy gets or how poorly a company performs, the Chief Executive Officer (CEO) (and other top executives) always come out in the best possible position, especially with compensation. Besides lavish compensation packages and best possible amenities, the CEO’s generally enjoy large severance packages or “golden parachutes”. Severance packages are basically contractual deals between the CEO and the corporation that in case the CEO is terminated for some reason or leaves the company, he/she is entitled to a specific sum of money on departure. Golden parachute is a term used to describe rich severance pay packages which in addition offer cash bonuses, stock options and benefits – essentially a complete and wealthy severance pay package. (Carroll & Buchholtz, 2009) The purpose of these packages was logical for industries prone to mergers, acquisitions or failure – it would protect the CEO in case the company experiences any of the above. Nevertheless it increased the moral hazard problem and the principal-agent problem within organizations. Basically the rationale has a fallacy where it protects the CEO and his/her pay if the company should fail, merge or be acquired but it doesn’t protect the company if the CEO performs badly and decides to bail out when the company is taking a dive. In this situation the CEO is capable of earning his/her regular salary and then collects...
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...Case Analysis: When Salaries Aren’t Secret Case Summary RightNow!, a retail chain specializing in women’s clothing, led by ◦ Hank Adamson as CEO. ◦ Charlie Herald as the VP of HR and ◦ Harriet Duval as the CFO. Someone exposes the salaries of all 165 employees via email. Since RightNow! Was exapanding fast, they hired people at a wide range of salaries; making the new salaries disparate from existing ones. Immediate reaction of employees - comparing each other on the basis of pay. Several started contacting HR to discuss disparity in pay. Charlie and Harriet come up with two opposing views on how to handle the situation. Hank must decide what to do. Charlie’s View Opened Pandora’s box and facing possible resignations and lawsuits. Need to turn this into a positive result. Keep salaries public henceforth. ◦ No need to have extra security and secrecy built around salaries. It might happen again anyway ◦ Most people share what companies pay online anyway ◦ Employees will self-correct pay disparities ◦ Fame to RightNow! Because of this policy Harriet’s View Short-lived gossip and furor which will pass soon. Disparities in income are present in all companies. Cant spend time explaining to each employee why they earn more/less than someone else Since the cat’s out of the bag, the company should revisit pay disparities and conduct review. Beef up computer security to avoid future incidents like this Commentator’s Advice - Victor Sim Exposing incomes would lead...
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...1. Recently, the issue of CEO compensation has been a subject of contentious controversy. Heated discussions erupt surrounding the impacts of executive pay to company performance. Some parties claim that executive pay can avoid the agency problem, which refers to the possibility of conflicts of interest between the shareholders and managers of a firm (Amarjit Gill, Nahum Biger and Smita Bhutani, 2008), in order to align the interest of executive officers and company. However, some people reckon that such compensation cannot boost company’s performance since the increase in revenue of executive officers does not mean an increase in their working incentive. Executive pay is the combination of salaries, bonuses and shares. Under most circumstances, there should be a positive correlation between executive compensation and company performance. As a medium of transaction, money has a profound relation with quality of life and the vast majority yearn for earning a living wage. Hence, money is always deemed a motivation for enhancing workers’ performance. There is no doubt that most executive officers attempt to maximize their revenues when the policy of executive pay is implemented. However, whether they would put strenuous effort into the business, this remains a dubious, uncertain question. Some may still slack off at work due to some personal factors such as laziness and lack of devotion to the company. First of all, executive pay will lead to a rise in risky investments. As...
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...of $53 billion which is a 17% loss in the last fiscal year. As JVA HR Director, my team of consultants has reviewed the cost of all additional compensation programs that is offered by the company that exceeds the current base salaries for all employees. These current packages in question includes commission, bonus, profit sharing and travel rewards to determine which amenities that need to be restructured or eliminate in order to cut cost of spending. As the HR director, I propose to make any necessary changes to the guidelines for the performance management within JVA Corp. I will first review the mission and goals for JVA Corp and how it applies to the requirements to each employee. I will also determine rather the compensation packages are also necessary, evaluate commission packages, expenses covered, perks, and the necessity of onsite amenities that are currently covered. Based on the current calculation of 150,000 employees within the United States, JVA Corp is currently spending 8% of its revenue for additional compensations or (perks). This current calculation is not counting our international locations. Within the 150,000 employees, approximately 35% are eligible for all of those additional perks, while the rest are offered base salary, with no option for additional compensation. These additional compensations accounts for billions of...
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...programs are ubiquitous in corporations, but there are serious flaws in how they have been implemented, particularly for executives. In this paper, we are going to discuss the incentives of four different CEO from Pharmaceutical Industry. Pfizer Merck & Co Bristol-Myers Squibb Vertex 2012 Revenue $59B $47B $21B $1.5B 2011 Revenue $65B $48B $19B $1.0B CEO Read Frazier Andreotti Leiden Base $1.75M $1.5M $1.6M $1.0M Annual Incentive $3.4M $2.5M $3.8M $2.1M Annual LT Incentive (Stock and Stock Options) $12.9M $7.1M $10.9M $2.5M Perks/Other $175k $0.06M $808k $0.01M Vested/Exercised Shares $5.6M Approx. Total $25M $11.1M $17.2M $5.7M According to the Proxy statements, both Pfizer and Mereck have approximately 90% of their compensation as variable, based on company performance. The large discontinuity between the two companies is mostly due to the vested or exercised shares of Pfizer’s Ian Read. Excluding this amount, the companies’ compensation plans are generally aligned with their comparable sizes and company performance. Pfizer offered the largest incentive-based payout to it’s CEO in 2012, justified by the company exceeding two of three performance metrics despite key patent losses and the leadership Read showed throughout the year. Merck ranked their CEO performance as high in a tough environment, but due to a low internal scorecard results and shareholder return rankings Frazier was awarded a lower amount of variable compensation than in 2011. Overall,...
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...Case Study: Salary Inequities at Acme Manufacturing When it comes to developing strategic pay plans it is important to have a good understanding of some basic factors to determine pay rates. Employee compensation is “all forms of pay going to employees and arising from their employment” (Dessler, 2013, p. 352). According to Dessler (2013), it consists of both “direct financial payments and indirect financial payments.” As we explore the case study of Acme Manufacturing, we will see the salary inequities and the struggles that the newly appointed president, Joe Black, has to go through to fix those issues. In an article titled “Fair Pay or Power Play?” Shin (2013) reported that “pay inequity provides strong motivation for CEOs to restore equity.” For this case, I will identify some issues and recommend some plans to resolve the salary inequities in the Acme case. Some key issues that existed within Acme Manufacturing were: lack of individual equity, internal equity issues, no pay structure for salaried employees, and lack of legal considerations in compensation. Equal Pay Act of 1963 (EPA) “makes it illegal to pay different wages to men and women if they perform equal work in the same workplace.” (“Laws Enforced by EEOC,” n.d.). With the previous president, Bill George, salaried employees bargained their pay. Joe Black identified that there were female supervisors that were earning less than male supervisors. Ultimately the underlying issue was management failed to create...
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...Disclosed: The Pay Gap Between CEOs and Employees By Elliot Blair Smith and Phil Kuntz May 02, 2013 Photograph by Jan Kornstaedt/Gallery Stock Nearly three years after Congress ordered public companies to reveal their chief executive officer-to-worker pay ratios under the Dodd-Frank law, the numbers still aren’t public. The provision was included to deter excessive compensation schemes that, in the words of U.S. Senator Robert Menendez (D-N.J.), “were part of the fuel that led to the financial collapse.” Since then, the requirement has been parked at the Securities and Exchange Commission, which must develop a rule on how to calculate and report the ratio. Questions remain: Do companies have to determine their median employee compensation by an actual count or would statistical sampling suffice? How should global companies reconcile differences in wages and benefits from one country to the next? For that matter, how should investors interpret differences in compensation across industries? Those who oppose publishing this ratio have seized on some of these questions to argue that the requirement be dropped. “We don’t believe the information would be material to investors in making investment decisions,” says Tim Bartl, president of the Center on Executive Compensation, the advocacy arm of a Washington nonprofit called the HR Policy Association. To get a sense of what such ratios could reveal, we conducted an experiment. It compared the disclosed CEO compensation mandated...
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