Last Updated 08 May 2020

Performance and executive compensation

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Leadership deserves executive compensation. It is widely acknowledged that senior executives normally employ more efforts than other employees like designing the corporate culture and implementation, patterning the strategy that influences shareholder value and setting the environment and corporate climate that ultimately impact the customer experience (McCool, 3) . All the above tasks are not easy thus the executives deserve executive compensation. In deed losing a strategic leader to turnover related issue is fatal for a company, a move felt across the firm.

The main challenge is that debates on executive compensation are mostly emotional and sometimes not on issues. As widely experienced, by capping on the pay of executives firms plunge to the risk of massive strategic employee turn over especially to other incentive ridden firms across the borders (Flannery and Hotfricher, 23) . For instance, the US treasury loosened the grip of planned ceiling on executive pay at $500,000 fearing that European banks and Asian firm would lure the talented staff (Clark) . Executive Compensation is justified

Despite the debate that emotionally has criminated executive compensation, executive compensation critically looking at issue forms one off the competitive advantage that blue chip firms are utilizing. Most blue chip firms are a remuneration policy that clearly draws the line on how executives are remunerated in transparent manner (Nippani et al. , 12) . As stated before, the tasks that executives are responsible for are enormous. Literally, they form the engine of a firm while other segments of the organization remain as components that make a vehicle move.

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By so doing, the executives must perform the following tasks. First, the executive management bears the bulk of designing the corporate culture of an organization will eventually follow. The task even extends to influencing the whole organization to follow the corporate culture. Secondly, it is the duty of the executives to design the corporate strategy that guides the firm. The corporate strategy definitely extends to impacting on the customer experience within the firm (Mathers and Goodman, 18) .

Additionally, the corporate climate that guides the firm in dealing with internal issues and external factors is steered by the decisions of the executives. It ought to be acknowledged that corporate decisions unlike other forms of decision making possesses the characteristic of tedious analysis, burning midnight oil in meetings among extensive consulting and traveling all to the well being of the firm. This makes the executive deserving of the executive compensation. Strategic decisions making is more risky than operational and tactical decision making (White, 23) .

The process takes lots of executive time and efforts in choosing the best optimal decision. This makes the executive management deserve fair compensation on the decisions they make. Logical reasoning stipulates that although they are compensated fairly, it is good decision to consider giving them opportunity to share in the firms’ profits like being given stock options that are highly subsidized (Equity, 65) . The debate on executive compensation is highly emotionalized leading to public criticism on the recipients of the scheme. Executive compensation helps in recruiting high talent caliber of leadership in the management.

It is common sense that highly performing employees at the executive level are on high demand and need motivation (Tran and Kleiner, 9) . These are persons that have seen companies turn around due to their experience and highly valued management and leadership techniques and styles. Recruitment firms agree often persuade the interested firms on a particular highly performing individuals must offer attractive executive compensation if they desire to attract and retain executives that are highly talented . This explains why the US rebuffed from the planned capping on executive pay at $500,000.

Conclusions The debate on executive compensation when tackled on a logical perspective rather than the often emotional front holds more water on the support for executive compensation. These are individuals that are on high demand and their efforts and decisions steer the firm strategically. It is catastrophic to consider capping on their earnings. The executives dedicate lots of their physical resources in running the firm. Finally, to attract and retain talented top performing executives, then attractive and honest compensation policy is vital.

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