executive compensation

Executive Compensation

Name of the Author

Abstract

Executive pay is merely a special case within the of compensation but it does have several twists that deserve special attention . First the base salaries of executives are higher than those of low-level managers or operative personnel . Second , executives frequently operate under bonus and stock option plans that can dramatically increase their American Express , General Electric , or MBNA can , in a good year , ear 10 million 15 million , or more on top of the base salary (Reingold Melcher McWilliams , 1998 . In this , we

would discuss how such compensations come about and why . Finally , executives receive perquisites or special benefits that others do not . We would be discussing on these benefits and their impact on executive motivation

Literature Review

Executive Compensation is higher than that of rank-and- personnel and also includes other financial and non-financial benefits not otherwise available to operative employees . This is done to attract retain , and motivate executives to higher performance levels . Some of the benefits provided under executive compensation include

Managed care programs

HMOs and PPOs

Flexible spending accounts

Cafeteria benefit plans

Vision plans

Group life insurance

Disability insurance and programs

Paid time off plans

In addition to base salary , many non-profit organizations offer their chief executives fringe benefits such as , health insurance , retirement plan , life , accident and disability insurance , professional dues and severance pay . Less common perks include incentive plan , car allowance entertainment expense accounts , tuition assistance and social club memberships

During the boom of the 1990s , a major factor in determining levels of base salaries and awards of equity compensation was the competitiveness of those levels to peer companies . When the demand for executives and seniors managers far exceeded the supply , the balance among factors shifted dramatically to this consideration . Hence , the need to attract and retain employees resulted in a rapid escalation in salaries and equity compensation

In today 's environment , the focus is more balanced between competitive and corporate needs . Competitiveness relative to similar companies is still important , but the need to be ahead of the competition has abated and other business factors have become more prominent . For example company performance (measured by achievement of key financial and strategic goals ) has become a central theme

Sanford Weill , Chairman and CEO of the Travelers Group , was recently awarded a salary that made people stop to check if the numbers were correct . In 1997 , Coss collected more than 230 million in salary bonuses , and stock based incentives (Reingold , Melcher McWilliams 1998 . Weill is not alone in this high salary ' category . The 20 top paid CEOs of U .S . companies like Coca-Cola , Intel , Morgan Stanley , Dean Witter , and Occidental Petroleum , averaged more than 60 million in their 1996 salaries . Incidentally , during this same time frame , the average worker 's pay raise was in the 3 percent range (Mariotti , 1998 Interesting , too , is that not one woman is included in the category of the highest paid CEO in Corporate America . The highest paid woman in Corporate America is...