Page 64 - Appreciating Organization's Biggest Assets

To address the issues Board of of the organization. Their KSA and
directors can develop a compensation experience should substantiate the
proposal for the Top executive that amount that they earn. However,
would be competitive to its rivals so employees, stockholders and
that the executives do not get lured. stakeholders have a question, why
The compensation proposal should firms pay such generous earnings
be a “total compensation” which to their executives. In order to
includes salary, bonuses, benefits, achieve objective congruence, ex-
and perks that are consistent with ecutive compensation must be tied
someone of this status. Ensuring a to company performance. An apt
successful IPO of the company will compensation structure will lead to
promote continuity among the top mutual rewards between executives,
leaders for next few years. Aligning shareholders and the company.
the executive interest with the Conceptual Background
stakeholders. Rewarding the CEO
for risk-taking and growth of the What is Executive Compensation?
company. Executive compensation is

There are various debates on financial as well as non-financial
executive compensation which can benefits received by a top execu- tive
be studied: shareholders do not like CEO or CFO in return of their
show faith in executives of large service. It is different and higher
corporations and believe they only to compensation which is paid to
work keeping personal interests employees. It is a mixture of fixed
in their mind. Few employees can salary, variable and other short term
resent because of the pay gap of and long term benefits.
executives to the average worker’s Unique Features of Executive
salary. This can push some workers compensation:
to form a union for collective
bargaining. Executive managers • It can’t be compared to the salary
are in the position of power and or wages of other employees in the
get ample amount of money in the company.
form of base salaries, bonuses, stock • Executive pay is based on
options, pension plans, benefits, etc. organizational performance and not
which can be misused for personal individual performance.
gains. • Executive pay is also based on

The aim of any CEO is to maximize prevalent market conditions. When
shareholders profitability and ensure there is a huge rush to fill the CEO
long-term growth and profitability position, the packages can go sky

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