Essay on the Compensation Package of CEOs

The compensation package of CEOs affects everyone in the organisation. Generally, it is considered as a benchmark to decide the employee benefits and bonuses. Compensation of CEOs indicates the performance of the company and sets a ceiling for the company in fixing the pay structure for each level of employees in the organisation. In simple higher the CEOs compensation package, better the significance of the company and its generosity towards other employees in the organisation. CEOs base salary accounts for just 20% and they make most of their money through incentives, annual bonuses, restricted stock awards, stock options and stock appreciation rights. The rationale is that CEO should be sharing in the success of the company when shareholders are making money and company is performing well due to his high level of commitment. Total compensation goes beyond cash and stock. It is supplemented with Executive Retirement Plans, Insurance Plans and miscellaneous executive perquisites. Inclusiveness of all this is a result of higher compensation structure for CEOs. The existence of these perquisites and plans not only attract better talent but signifies the image of the organisation and its performance in the competitive market across the globe.

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Companies paying lesser compensation to CEOs may not survive for the longer period as CEOs association with the organization may not continue for the prolonged era. It is observed that in the United States the ratio of chief executive: average worker pay is 500:1. It clearly shows that higher compensation offers employees a motive to work hard with a hope to win the tournament to be CEO. This compensation structure allows the company to hire top talent by acting as an incentive for the CEO to work stiff. It facilitates them to engage in building an empire in the long run. The accepted phenomenon among shareholders and workers in the United States is the pay for performance and CEOs are offered huge bonuses and stock options based on the company performance. The pay package of WPPs Sir Sorrell is the best example of high paid CEOs talent referring to his 2015 remuneration of 70m reflecting the strong shareholder returns. In simple CEOs get paid beyond the dreams of most people. Another example is John Chen of BlackBerry. As per the Canadian Centre for Policy Alternatives, he is the highest paid CEO in Canada in 2014 with total earnings of more than $89.7 million.

Knowledge is the key potential and critical than ever before for leaders to cope with widespread myriad pressures and yield sustainable competitive advantage. The key motivators to knowledge contributors as explicit and implicit include good values, strong principles and scientific wisdom. The drive for a leader to be visible and effective lies with approach and leadership style. As a master craftsman, he understands the key issues of the moment and acts on them immediately. He can spur individuals to act with high political wisdom. His idealism makes him believe he is right and good for the society and the company. His philosophical approach drives him to grasp the essence of a problem and facilitate to draw conclusions with random observations. His way of narrating the problem using metaphors and rhetoric to make highly acceptable decisions makes him more visible. His pragmatic nature and envisioning the situation to the larger context makes him effective by bringing practical wisdom to a way of life.

Chief Executive Officers get paid higher compensation for being the top employees in the corporate just like athletes in the sports and actors in the film industry. They offer a key level of talent which is essential to produce the desired product and services. This top competence makes the company unique with its competitive advantage in the industry. The skills possessed by them are extreme and it is limited to a number of individuals who can exhibit in a profitable way. The responsibilities are of CEO are infinite and the position requires a high level of commitment as he is considered as a brand ambassador of the company. They have complete control over making investments including mergers and acquisitions. This power is exercised with more experience and high level of practical wisdom to build the empire of the organization. They are prepared to take a high level of risks with complete preparedness which requires risk-incentive trade-off looms large at their level.