Top Management’s Compensation and Its Harmful Effects
Top Management’s Compensation and Its Harmful Effects
Introduction
Now-a-days it is becoming very common practice among companies to pay very high compensation to their CEOs (Chief Executive Officers) as well as top management executives. When general people come to know that CEOs and top executives draw a huge amount of compensation from their companies, they think what a teacher, a government employee make and wonder what those executives could possibly be doing to earn so much. But when shareholders see those compensation packages, they are concerned for a bit different reason: They wonder why CEOs should make so much when the returns they produce for stock owners are often so poor? (Coleman, 2005)
Natural belief is that high salaries are paid to the top executives to encourage them to work sincerely and take effective decisions. Shareholders fate mainly depends on the decisions of the top management. But in reality, are the CEO’s and top executives really sincere about the shareholders? Although the main objective of a company is to maximize the shareholder’s wealth, the most CEOs are mainly concern about maximizing their own wealth rather than work in favor the shareholders. Some people think CEOs and top executives have “special skills and expertise” that normal person cannot achieve. But it should not be so high that CEO is paid 150 times what the average employee of a company does (Chistian, 2007). This type of scenario is mainly common in developed countries like USA and England. But now this problem is emerging in many developing countries like India and Bangladesh.
Whittlesey (2006) is chief compensation officer at Pay Scale said, “After more than 20 years in the field of executive compensation, I have seen numerous examples of inappropriate pay for executives--not only in amount, but in reason and in form. Billions of dollars have been paid to thousands of executives who have destroyed companies and ruined workers ' lives”. So, high compensation
Introduction
Now-a-days it is becoming very common practice among companies to pay very high compensation to their CEOs (Chief Executive Officers) as well as top management executives. When general people come to know that CEOs and top executives draw a huge amount of compensation from their companies, they think what a teacher, a government employee make and wonder what those executives could possibly be doing to earn so much. But when shareholders see those compensation packages, they are concerned for a bit different reason: They wonder why CEOs should make so much when the returns they produce for stock owners are often so poor? (Coleman, 2005)
Natural belief is that high salaries are paid to the top executives to encourage them to work sincerely and take effective decisions. Shareholders fate mainly depends on the decisions of the top management. But in reality, are the CEO’s and top executives really sincere about the shareholders? Although the main objective of a company is to maximize the shareholder’s wealth, the most CEOs are mainly concern about maximizing their own wealth rather than work in favor the shareholders. Some people think CEOs and top executives have “special skills and expertise” that normal person cannot achieve. But it should not be so high that CEO is paid 150 times what the average employee of a company does (Chistian, 2007). This type of scenario is mainly common in developed countries like USA and England. But now this problem is emerging in many developing countries like India and Bangladesh.
Whittlesey (2006) is chief compensation officer at Pay Scale said, “After more than 20 years in the field of executive compensation, I have seen numerous examples of inappropriate pay for executives--not only in amount, but in reason and in form. Billions of dollars have been paid to thousands of executives who have destroyed companies and ruined workers ' lives”. So, high compensation
References: Whittlesey, F. (2006, June). Perspective: The great overpaid CEO debate. Retrive from http://news.cnet.com/The-great-overpaid-CEO-debate/2010-1014_3-6078739.html Whelton, R.S.(n.d.) Boisseau, C. (1996, June 9). Workers foot bill for boost in bosses’ pay. Retrieved from http://pages.tca.netstevebceo.html.nwsource.com/html/businesstechnology/2001960610 _.html Vogl, A Callahan, D. (2004). The cheating culture: Why more Americans are doing wrong to get ahead. Reh, F. J. (2005). CEOs are overpaid. Retrieved August 15, 2011, from http://management. Coleman, B. (2005). It starts with the CEO. Retrieved from http://www.salary.com/ advice/layouthtmls/adv...isplay_Cat14_Ser69_Par147.html Christian, B. 92007) why ceos are paid such high salary. Retrieved from http://www.linkedin.com/answers/hiring-human-resources/compensation-benefits/HRH_CMP/34389-1373253