URRENT CONTROVERSIES IN EXECUTIVE PAY COMPENSATION (same as last essay )
CURRENT CONTROVERSIES IN EXECUTIVE PAY COMPENSATION
Currently, many businesses are developing various methods by which they can use in creating and consolidating on their market share. This is because; the modern business environment is composed of many businesses that are emerging to challenge those that have been in the industry for a long time. For this reason, various research studies have been carried out to establish ways in which businesses can remain to be competitive while achieving their mission and vision. One of the reasons for the increasing number of business activities is the liberalization of economies and the growing globalisation trends across the world.
In ensuring that businesses can achieve their goals of remaining effective and efficient in the competitive business environment, consistent market research has been found to be an important practice. Through research, businesses can keep themselves abreast of changes in the market, which is important in developing goods and services that meet the identified needs ( Armstrong & Ann 2011, p. 67). However, doing this requires that business have staff that can create and implement strategies that can help these businesses in their operations. With an increasing number of businesses in many industries, there is a great competition for the managers and leaders that can revive the hopes of businesses. In this regard, businesses try to ensure that they offer the best compensation packages for their executives in encouraging them to remain committed to the business and assist them in their operations
Executive Pay Compensation
So far, research has indicated that people are the most important resources that businesses require in creating their competitive strategies. This stems from the fact that people have the capability to understand the business environment and ways of creating their success. In having a competent staff, one of the approaches used is ensuring that people get the best pay for their work they do in the business. Some business owners believe that having a competent staff is the key to having effective and efficient work. While it may be true, the approaches used in achieving an effective and competent staff are what differ from one business to another.
One of the questions that have kept appearing among most of the researchers concerns the real worth that can be attached to business executives. Are the top managers and other CEOs justified by receiving millions of dollars at the end of their month on their paycheck? If that can be case, can their salaries be justified from the work that they do? These among other questions have formed the centres of discussion whenever employee compensation is mentioned. While some businesses often use money as a means of motivating their staff towards better performance, others often prefer using other non-monetary forms of incentives to achieve same; this has led to a huge controversy concerning executive compensation pay.
Inasmuch as business executives have continued to be the beneficiaries of huge pays from their companies, some people have been outraged by this observation, making them to make inquiries about whether it is a wise move by multinationals and other corporations. The fact is that large businesses often have a diversity of work activities to be done in many of their business branches; in this case, they often require a top management that understands the business and the industry in general.
With an increase in the number of businesses competing for the same market share, businesses are left with few options as attractive strategies for encouraging highly skilled staff to join their companies and business organisations. Therefore, the business that offers pay compensation that exceeds others in the same industry often end up getting the most effective and competent workers. According to research, some businesses end up creating success by offering high pays for their workers, but this strategy has been criticized for lacking a long-term effect on the performance of staff including business executives. According to Ferracone (2010), offering non-monetary rewards can also be an effective approach towards staff motivation.
Smith (2007) explains that a number of considerations have often been raised to justified high executive pays for top business executives. On one hand, some people are of the opinion that the idea of a free market is in existent, and has become the main dictator of the kind of pay that company CEOs should be paid (American Bar Association. 2011, p. 34). Inasmuch as what other peers are doing is legal, critics look at company as being the stars of the business, something that underpins their high pay, in this understanding, American Bar Association. (2011) puts it that the companies in need of the services of these CEOs have to understand their track record in terms the companies they have managed before, their accomplishments in those companies and other factors that give them a cutting edge over other managers in the industry. In short, the reputation of such people is what companies look at before seeking their services with promises of hefty sums on their pay-check.
By understanding all these factors, the companies often give huge offers knowing that these CEOs will have a positive impact on their operations and ultimately to the growth prospects of the business. Therefore, the company or business organisation that finds itself with the money enough to pay the CEO ends up managing to get their services. In this regard, . Armstrong & Ann (2011) explains that the free market situation gives businesses the leeway to find professionals that it can pay. A business that does not have the much-needed funds to manage this process can only go to the extent that its budget allows.
The second consideration that underpins the need for hefty pays for company CEOs stems from the fact that in the business world, people have different gifting and talents that warrant the need for receiving hefty pays. In this regard, those managers and leaders that have special skills and talents in management sell their expertise and talent highly. This means that only those businesses that can match their particular offers have the right to hire them. According to Balsam (2002), these kinds of managers and leaders have unique skills and talents that the free market can afford to give the millions of dollars on annual basis. These people often drive many product and service sales in a manner that increases the revenue for the business. Armstrong & Ann (2011) explains that the pay for these managers is often long discussed before they are hired and their failure and / or is obvious.
According to Balsam (2002), very few people have the capacity to successfully lead and manage multinationals that have more than 50,000 employees that generate more than $50+ billion in terms of annual revenue. With this shortage, it means that a great demand for the stars, who are the people with this potential remains high; therefore, to get these few that are in existent means that businesses have to pay heftily for their services.
Executives have value
Another important consideration that is given priority as far as executive pay is concerned is associated with the value that these people are said to bring to the table. Successful business executives are known to have special value to the business; they have always been known to create more than mere entertainment in that they steer businesses to unprecedented heights in terms of achievements. Business executives create more jobs that deliver lasting wealth for businesses and their investors. They have life-changing ideas and innovations that make businesses stand out in their industries.
Smith (2007) posits that a good example of such managers is Lou Gerstner, who is credited with driving IBM to its current status it enjoys as one of the best companies as far as technology is concerned. According to Smith (2007), Harvey Golub, the ma