Question

Your CEO has announced his retirement, prompting you to review your executive compensation package.   You want to attract top talent, but CEO compensation has risen drastically in the last several years. Your Board of Directors feels the need to offer a package that is near market rates, but with your Compensation and Benefits expertise, you know increasing the pay gap between top management and the average worker causes problems with employee morale and creates a disconnect between management and employees. You pulled up a list (Links to an external site.) of pay ratios and found many successful companies with lower CEO compensation rates. Prepare a two-page report for your Board of Directors explaining what you feel is the ideal ratio of CEO to average worker pay. Justify your recommendations with research, using at least two sources other than the eText. APA style is required.

Answer 1

Hi Greetings for the day.

To maintain the ratios we can devide the copmponsations in 3 parts.

1- Fixed salary ( 70% of total componsation)

2- Perks & reimbursement- (10% of total componsation)

3-Performance base payouts -( 20% of total componsations)

By doing that we will be able to maintain the salarry ratio in the organization, and performance based payout always motivate to employee to earn more and in similar way the same performance will help to generate more revenue.

1. Boards can require that CEOs become substantial owners of company stock.

2. Salaries, bonuses, and stock options can be structured so as to provide big rewards for superior performance and big penalties for poor performance.

3. The threat of dismissal for poor performance can be made real.

Unfortunately, as our study documents, the realities of executive compensation are at odds with these principles. Our statistical analysis departs from most studies of executive compensation. Unlike the annual surveys in the business press, for example, we do not focus on this year’s levels of cash compensation or cash compensation plus stock options exercised. Instead, we apply regression analysis to 15 years’ worth of data and estimate how changes in corporate performance affect CEO compensation and wealth over all relevant dimensions.

P.S.- Please share your valuable feedback

Regards

Sandeep