Research on executive compensation packages clearly demonstrates that the general public is incensed and outraged by, what they perceive to be, excessive pay and benefits for these professionals. Throughout the course of the twentieth century organizations have argued that executive pay and benefits are determined by the actions of the executive as they relate to the performance of the organization. However, a more integral look at the issue of performance demonstrates that while investors believe performance should be directly linked to the financial development of the organization, executive committees that structure executive compensation packages performance refers to a host of issues that lie outside of the financial development of the organization. In an attempt to elucidate these issues, this investigation considers a review of the specific issues that are taken into consideration in developing executive pay and benefit packages.
[...] Given the importance of investors to the organization, it is clear that maintaining investor confidence is a key issue for the continued success of the organization. In the end, it is clear that if organizations are to meet the needs of all stakeholders and shareholders information on how executive compensation packages are developed will be necessary for achieving this end. Executive compensation has become such a contentious issue that if steps are not taken by the organization to mitigate this tension, notable problems may develop in the long-term. [...]
[...] What appears to cause the most obfuscation for investors and other organizational stakeholders is the umbrella term of “performance” that is typically utilized to justify the pay and benefits packages given to executives. Clearly, what this research elucidates is that the specific measures of performance that are utilized for developing executive compensation packages are much more complex than what the average investor understands. In most cases, investors assume that the “performance” that is utilized for executive compensation is that which is directly tied to the financial development of the organization. [...]
[...] Given the negative attitudes that continue to pervade modern perception of executive pay and benefits packages, examination of this issue should provide some clarity as to whether or not executives are overpaid for their contribution to the organization. Further, through a careful consideration of what has been written on the subject it will be possible to provide more insight into understanding of how pay and benefit packages are determined for the corporate executive. With this information, a more integral understanding of both the contribution of the executive to the organization and the development of pay and benefit packages will be gleaned. [...]
[...] When placed in this perspective, it becomes evident that executive pay and compensation packages have to be predicated upon something other than the financial performance of the organization. Over the course of the last five years, the financial performance of most organizations has declined notably. Despite this however executive compensation has continued to rise steadily. With this in mind, the question then becomes: can organizations effectively justify the executive compensation packages that they provide to their top leaders?” Interestingly, the research continues to support the theory that executive compensation is directly linked to the performance of the organization. [...]
[...] Further examining the issue of base pay in the context of executive compensation, Higgins (2005) also asserts that the need to create equity with regard to all executives in the same industry is one that is of paramount concern for most organizations. According to this author, base salaries for executives are predicated upon the need to attract and retain qualified individuals. In many industries, there are declines in the number of individuals qualified to fill executive roles. As such, in order to remain competitive organizations must offer significant benefit packages to attract the leadership necessary to facilitate the growth and development of the organization. [...]
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