Executive Compensation Structure and Company Performance - Essay Example

Summary

In order to counter negative external effects a firm may revolve to adjusting its policies in order to stabilize its operation. The article indicates a correlation between executive pay and overall company performance…

Download full paper File format: .doc, available for editing

GRAB THE BEST PAPER95.4% of users find it useful

Executive Compensation Structure and Company Performance

Read Text Preview

Subject: Business
Type: Essay
Level: Undergraduate
Pages: 1 (250 words)
Downloads: 2
Author: javon18

Extract of sample "Executive Compensation Structure and Company Performance"

Stock Performance Verses Executive Pay al Affiliation Stock Performance Verses Executive Pay There exist factors that affect performance of the company. In order to counter negative external effects a firm may revolve to adjusting its policies in order to stabilize its operation. The article indicates a correlation between executive pay and overall company performance. The company stocks determine what the firm may pay its top most executive. Bonuses are offered to executives in an event the company performance is above its competitors.

A reduced pay may indicate external effects on company’s return on stocks. The article brings on the notion that the most paid CEOs are those whose firms have the highest returns on stocks. The Yum CEO’s pay drops to 10 million, which is a 22% decrease. This indicates how the overall revenue may be a determinant when calculating the total pay of executives. CEO is directly liable when a company underperform. Considering the model used to calculate the pay of the CEO, it is evident that a CEO is motivated to perform once a pay cut is registered on the overall salary package.

Each company formulates its payment model based on the stock performance however Giorgi and Chemi (2014)indicates the model being a myth as many companies shows that there is no correlation between the company stock performance to the payment packages. They attribute only 1% of highly paid CEO to be based on stock performances. In conclusion, the compensation policies vary depending on the firm’s priority. The article shows how stock performance determines the compensation package of a CEO.

The model works to ensure the company’s top chief works towards ensuring the overall performance of the company is stable and overcome external factors. ReferenceChemi, E., Giorgi, A. (2014, July 22). The Pay- for- Performance Myth. Business week. Retrieved from http://www.businessweek.com/articles/2014-07-22/for-ceos-correlation-between-pay-and-stock-performance-is-pretty-random.

CHECK THESE SAMPLES OF Executive Compensation Structure and Company Performance

Is CEO Compensation Directly Related to Performance

executive compensation structure, ownership, and firm performance.... It is difficult task for assessing the executive compensation and evaluating whether they are working in favor of their investors (Antle, 1986).... It is difficult task for assessing the executive compensation and evaluating whether they are working in favor of their investors (Antle, 1986).... The objective of this research is to provide an insight of the executive compensation by discussing the empirical and theoretical research on executive compensation....

3 Pages (750 words) Term Paper

What Is Executive Compensation

CEO compensation and company performance.... CEO compensation and company performance.... In Australia the Australian Securities and Investment Commission were developing strategies that would help in the construction of a pay setting structure and would make CEO risk averse because of their heavy investment in human capital resources and also the adverse impact on the performance of the CEO.... The paper "What Is executive compensation" highlights that an implication of the analysis of the compensation management system is the failure to maximize the shareholder's wealth and value which is an indicator of weak corporate governance mechanisms....

11 Pages (2750 words) Essay

Executive Compensation and Company Performance

The paper "Executive Compensation and company performance" states that evidence that executive pay is tied to company performance does not, however, deny that greedy executives have abused governance gaps to exploit conflicts.... Executive Compensation and company performance This paper discusses the ment: "Of all the lies out there, the one that corporate executives' payis linked to the performance of their companies takes the prize.... "executive compensation structure, Ownership and Firm Performance"....

9 Pages (2250 words) Coursework

Pay Structures, Pay & Merit

xecutive compensation differs from sales or human resource personnel on the ground that executive compensation involves negotiation between the executive and the employer (Peter, 2002).... ffering of more lucrative salary to executives is made in a bid to attract, motivate, and retain executive officers who have the capability of leading and managing business successfully, link an organization cash incentives with measurable performance align their interests with the company's' interests to achieve long-term goals....

2 Pages (500 words) Assignment

Salary Levels of Company Executives

Literature Review: Salary Levels of Company Executives Table of Contents Literature Review 3 Salary Packages 6 Salary Packages and Job Satisfaction 7Salaries and Job performance 7 ... The arguments also look towards a link between performance in the workplace and role of compensation therein.... The salary provided by a company also implies the policy and procedural structures of the concern, where some employees are paid higher than others owing to higher performance (Hewitt, 2009; Pearce, 2009)....

13 Pages (3250 words) Essay

What Is Executive Compensation

Moreover, there is always deliberate discussion over the compensation policy, especially during the time of poor company performance and financial crisis (Balsam, 2002).... The paper "What Is executive compensation" discusses that CEOs play an important role in the organization and are from backgrounds with different knowledge and needs, which provoke the organization to compensate them during the time of poor performance.... Corporate governance serves as the crucial mechanism regarding the policy to provide improved control over executive compensation....

6 Pages (1500 words) Essay

Compensation Strategy at XYZ Plc

Effective executive compensation: Creating a Total Rewards Strategy for Executives.... Theoretical and conceptual frameworks on employee performance and compensation have been developed over the years to support pay-related job enrichment and enlargement schemes.... Employers have often been influenced by the existence of a variety of factors like performance enhancement and strategic skills development processes to adopt such schemes or programs....

6 Pages (1500 words) Case Study

Is CEO Compensation Directly Related to Performance

It is a difficult task for assessing executive compensation and evaluating whether they are working in favor of their investors (Antle, 1986).... he objective of this research is to provide insight into executive compensation by discussing the empirical and theoretical research on executive compensation.... Due to the interdisciplinary literature, executive compensation has received attention from labor economists (Core J.... executive compensation entails opportunities for analyzing concepts related to labor economics, productivity, promotions, and incentives....

3 Pages (750 words) Term Paper