compensation of ceos
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EXECUTIVE
COMPENSATION
PRESENTED BY-
SUNAKSHI RATTAN
ABHISHEK KANWAR
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Executive Compensation is the
compensation paid to executives of business
corporations.
Three main motives:-1. Attract
2. Retain, &3. Motivate; the employees
Changing scope of executive compensation.
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Maintainance of secrecy.
No two managers in private sectors, in same grade
receive same pay.
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Base Salary Short TermIncentives
Long TermIncentives
SupplementaryBenefits
Perquisites
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Salary determined through job evaluation andCompensation Committee.
Norms of wages and salary fixation are generally notobserved while fixing salary of manager.
Low base salary prefferred by executives.
Salary makes up of about 40 to 60 % of top managersannual compensation but it is not significant , as it is subjectto deduction at source.
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This type of incentive is annual and based on companyperformance or profit sharing.
There are many bonus system as there are companies usingthis form of managerial remuneration.
In some system annual bonus tied to share returns oninvestments.
Other bonus plans are based on subjective judgments ofboard of directors and CEOs.
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Induces commitment among executives andreduces turnover.
If bonus are short term benefits , STOCKOPTIONS are long term benefits offered tomanagers.
Stock options valuable as long as price ofshare keeps increasing.
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Deferred Compensation
Cash Bonus InsuranceProfit Sharing in case of Incentives Interest Free LoansExpense Account and Membership
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Internal Perks
Luxury office Executivedining room
Special
parking, etc.
External Perks
Payment ofhotel/resort
Air travel
Incidental
expenses,etc.
Personal Perks
Low costloans
Personal useof company
property Homerepairs, etc.
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The salary of top executives of public sectorare miserable compared to private sector:
S B I chief is paid 10 % of HDFC BankManaging Director.
BHELS chief is getting about 10 to 12 lakhsperannum as against Asea Brown Boveris (ABB)MD getting nearly 40 to 50 lakhs
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Managers success is the means by whichorganizational goal is achieved.
To attract and retain talented and competentmanagers.
For manager financial reward is symbol of socialprestige, power and position.
High compensation is made to manager to eliminateor minimise corruption.
CEOs work for endless hours under high pressure.
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How Should Executives Be Paid?Strictly performance based?
ORBecause of responsibilityok to pay even when notperforming well?
What do you think?
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The culture ofexcess greed,
excess
compensation,
and excess risk
has to change-Barack Obama
(President of the USA)
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Obscene amounts of money paid to CEOs whenthe world is undergoing recession is not justified.
Minimum shareholders say in the process.
Many people contribute to CEOs success, notjust a CEO, others are only paid a fraction ofCEOs salary.
Businesses are under enormous pressure toretain qualified executives once they hire them.
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Executive Compensation is different fromcompensation of other employees.
Foster transparency in compensationpractices and appropriate dialogue betweenboards and shareholders.
Much more than just salary. Always a debatable topic. Ever-growing issue with the current
economy.
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