Essay - Executive Compensation Programs and Incentives in 1996 the Average Salary...

Executive Compensation Programs and Incentives

In 1996 the average salary plus bonus for CEOs was $2.3 million. After o*****r benefits were added, this sum rose to $5,781,300. 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, *****se efforts not only failed but served to raise the bar on executive ***** even higher (Milkovich ***** Newman 455). In general, the CEO of a corpor*****tion makes at least twice as much as the next highest paid executive and 35 times the salary of the average worker (Bogie 118). This pay disparity becomes even more alarming when bad leadership causes mass layoffs and shareholder losses even as *****p executives continue to receive their oversized *****.

Executive compensation consists of five b*****ic components: 1) base *****, 2) annual incentives /bonuses, 3) long-term incentives and capital appreciation plans, 4) employee benefits, and 5) perquisites (Milkovich and Newman *****58). The exact proportion of this mix will rely on the executive's positi***** within the organization. For example, *****s will often ***** ***** benefit packages weighted toward ***** incentives given that their decisions affect the long-term positioning of the ***** while vice presidents ***** packages ***** often lean toward short-term incentives (Bohlander, Snell and Sherman 414).

Executive base salaries are usually dependent upon other executive salaries in the same field. This salary is usually determined in part by a survey of salaries ***** comparable companies ordered ***** ***** board of director or ***** compensation committee. In the automotive industry, CEO ***** average out at approximately $814,000 (*****, Snell ***** Sherman *****). Executive base pay will also be dependent on the type of *****ganization, ***** size ***** the organization and geographic location of the company. In *****, an executive's base pay makes up approximately 40 - 60 percent of ***** ***** (Mathis and Jackson 479).

When compensation committees are made up by the board ***** directors problems can arise ***** that many of these individuals lack expertise in compensation matters. In such cases, the committee usually *****s toward the plan proposed by ***** CEO ***** has hired an outside consultant to advise on ***** matters. According ***** Graef Crystal, a former compensation consultant, it is considered politically incorrect to ignore the CEOs recommendations. "If things get bad enough, you can fire ***** CEO. But until you do, you'd better s*****port him. *****deed, about the only time I have seen a board attack a ***** on his ***** h*****s been ***** it has already decided ***** get rid ***** *****"

Bogie 113)

Short-term performance incentives ***** based ***** the ***** individual contribution to the company. ********** bonuses may be based on a percentage of ***** organization's total prof*****s or a percent*****ge of pr*****its in excess of a specific return on stockholders investments. Other plans include basing the executive's b*****us on specific objectives set forth by the board ***** directors ***** agreed to by *****