Essay About Executive Pay Package And Fairness Of Executive

Mgmt 350 – Executive Pay
Arkan Al-banna
MGMT 350
Dr. Calo
Nov 04 2010
Executive Pay
Pay is an important feature of human resource management, it is the main reason
why people work. It is a sensitive and controversial area that has been extensively debated at
both practical and theoretical levels. This compensation can be considered fair if the
achievements and contributions are incredibly scarce. It becomes a problem for the rest of the
members of the team because they want to be recognized appropriately for their contributions as
well. If the people that are overlooked do not become appropriately compensated for their
important duties, it is not a problem, but when the company begins to suffer, they then realize
just how important those people become.
Many factors have to be taken to consideration when considering the fairness of executive
pay. The executive pay package should be responsible to shareholders, which means that it is not
so high that it detracts from company profits or that its incentives discourage unethical influence
of stock prices. Also, pay packages must be competitive with those of other similar organizations
so that executives can be recruited, rewarded, and retained successfully. If a pay package is not
competitive, there may be motivation problems or turnover. Besides, executive pay should fit
with the companys strategy so that it encourages overall company success. This is particularly
relevant in regards to short-term bonuses and long-term incentives which can be used to steer the
performance of the executive and the organization, and the compensation for executives must be
in compliance with regulations. There are a number of laws regarding retirement plans, stock
options, and other compensation components which must be followed when designing executive
pay plans.
There is a strong relationship between performance and rewards. In some organizations the
reward