Executive Pay

Topics: Management, Stock, Goal Pages: 1 (313 words) Published: June 16, 2012
Executive Pay.
Some evidence suggests that there is a direct and positive relationship between a firm’s size and its top-level managers’ compensation. Explain what inducement you think that relationship provides to upper-level executives.

I believe that top-level managers generally are compensated based on the size of the firm because of the risk, education, stress, hard work, and expected level of achievement that their job duties require. The top-level managers are expected to take a risk at making decisions that could lead to the firm’s success or failure. Often top-level managers have obtained four to six years of the appropriate hard university work that makes them better qualified to perform their job duties. Most levels of management are accompanied by a certain level of stress, knowing that their actions will have a direct impact on the firm’s performance. Most top-level managers put a lot of work hours, at home and within the firm, trying to successfully run the firm. The top-level managers of a firm are expected to achieve organizational goals and objectives by planning, organizing, implementing strategies, and overseeing the budgets and other aspects of the firm. The top-level managers set the goals for the organization and direct the company to achieve them. Therefore, the size of the firm should influence the compensation for such job requirements.

Recommend what can be done to influence the relationship so that it serves shareholders’ interests. It would be highly important for shareholders to connect closely as is possible to management and the available information about employee performance, and the compensation for that performance. I would recommend encouraging executives to make business decisions that will benefit shareholders’ by offering incentives for meeting performance goals. For instance, offering stock options as an incentive could discourage top-level management from keeping profits or bonuses acquired from sell of company...
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