Executive Compensation Programs

Paper Summary:

This paper looks in detail at these types of packages, listing that they consists of five basic components: 1) base salary, 2) annual incentives /bonuses, 3) long-term incentives and capital appreciation plans, 4) employee benefits, and 5) perquisites. Each of these components are analyzed for the short and long term benefits.

From the Paper:

"In 1996 the average salary plus bonus for CEOs was $2.3 million. After other benefits were added, this sum rose to $5,781,300. Beginning with Revlon executive Michael Bergerac who broke the $1 million mark in 1974, executive pay and bonus plans have soared to mind-boggling proportions. Although various governmental agencies have set limits on tax-deductible executive compensation, these efforts not only failed but served to raise the bar on executive compensation even higher (Milkovich and Newman 455). In general, the CEO of a corporation makes at least twice as much as the next highest paid executive and 35 times the salary of the average worker (Bogie 118). This pay disparity becomes even more alarming when bad leadership causes mass layoffs and shareholder losses even as top executives continue to receive their oversized pay."

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