Executive Compensation is financial payments and non-monetary benefits provided to
high level management in exchange for their work on behalf of an organization. The types
of employees that are typically paid with executive compensation packages include
corporate presidents, chief executive officers, chief financial officers, vice presidents,
managing directors and other senior executives.
Now-a-days, executives are paid very excessive compensation. Managers rise from
something akin to royalty when their compensation is at unjustified levels and when the
rewards of employment are not more commonly and fairly shared with the general
employee base. Because of the prevalence of stock option and restricted stock grants,
shareholders include many if not most senior managers at a large number of publicly
traded companies.
CEOs earn roughly 20 times as much as the average employee. The managers are able to
earn almost obscene levels of compensation and then get favorable income tax treatment to
boot. Management has so elevated itself above average employees as to have become a
constituency unto itself and one that, to compound the inequity, largely sets its own
compensation.
The disparity in compensation today is an ethical embarrassment to our country, and it is
certainly an affront to workers and to shareholders.
If the executive compensation is used appropriately without any excess or fraudulent
actions, it can bond executives to owners so as to enhance shareholder wealth. On the other
hand, the misused or dysfunction of this corporate governance mechanism can impoverish
managerial entrenchment and moral hazard. The huge amounts of executive pays drive the
