Most important is the opinion of a compensation committee, usually composed of the organization's board of directors. In most cases, the compensation committee takes over some information analysis previously done by the chief human resource manager (Samsa & Scheidt, 2013)
As a result, total compensation awards have been reduced by 20% and all future pay will be determined based upon management's ability to meet organizational goals. (Chazan) This is significant, because it highlights how a shift is occurring, where the levels of outrage are becoming so extreme, that shareholders are no longer tolerating excessive pay packages
This is in response to him helping the company post a profit of: $42 billion, during one of the worst recessions for the auto industry since the 1970's. (Inaoe) When you compare this with American corporations; it is clear that foreign-based entities have an independent board of directors (who will tie compensation to the performance of the company)
To arrive in Washington from Detroit, Wagoner would utilize the company's private jet to fly him to the meeting. (Ross) This is troubling, because it shows the level of arrogance and complacency that many executives have about compensation
This is because, the board is less active in this aspect, which means that they will often approve outrageous pay packages (despite the fact that the company could be losing money). (Randall) Solutions To reverse the trends that are occurring requires, that some kind of effective solution is implemented, to address the problem
Although various governmental agencies have set limits on tax-deductible executive compensation, these efforts not only failed but served to raise the bar on executive compensation even higher (Milkovich and Newman 455). In general, the CEO of a corporation makes at least twice as much as the next highest paid executive and 35 times the salary of the average worker (Bogie 118)
The exact proportion of this mix will rely on the executive's position within the organization. For example, CEOs will often have their benefit packages weighted toward long-term incentives given that their decisions affect the long-term positioning of the organization while vice presidents compensation packages will often lean toward short-term incentives (Bohlander, Snell and Sherman 414)
In addition, executive plans will often include elements not found in the regular employee benefit package such as no co-payments on health insurance, no limitations on deductibles or physician choice, and corporate-owned life insurance on the life of the executive (Mathis and Jackson 479-480). Golden parachutes" is a term for very large sums of severance pay offered to retiring or forced out CEOs and executives (Dovring 20)
Executive base pay will also be dependent on the type of organization, the size of the organization and geographic location of the company. In general, an executive's base pay makes up approximately 40-60% of annual compensation (Mathis and Jackson 479)
Beginning with Revlon executive Michael Bergerac who broke the $1 million mark in 1974, executive pay and bonus plans have soared to mind-boggling proportions. Although various governmental agencies have set limits on tax-deductible executive compensation, these efforts not only failed but served to raise the bar on executive compensation even higher (Milkovich and Newman 455)
6 million while Steven P. Jobs of Apple Computer was given a corporate jet valued at over $90 million (Lavelle)
The influence of factors such as the relationships between the board, leadership, and ownership characteristics and organizational outcomes have led several scholars to conclude that when CEO compensation fails to correlate with performance, boards can be viewed as forsaking their obligations to shareholders or, at the least, failing to use compensation as a mechanism of control. In other words, the findings of such studies do not support the notion of the agency and managerial hegemony theories that independent directors enhance the governing effectiveness of the board (Hopkins et
Executive Compensation The role of compensation in organizational behavior is an important one as it is used as a key tool by management to achieve social control over its employees (Pfeffer, 1997, p
In addition, the increasingly competitive business environment of the last few decades has necessitated that organizations control labor costs, while focusing simultaneously on increasing productivity, quality, and enhanced customer service. Other trends such as flatter organization structure, more fluid organizational design have also required new strategies for employee compensation, particularly as employee compensation is deemed to be critical to financial success (Schuster)