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Debating the Reasonableness of Executive Compensation

Debating the Reasonableness” of Executive Compensation The notion that monetary incentives tied to performance result in impro~C:d performance makes sense to most people. However, how much money does ‘it take? The debate a bout whether executive compensation in the United States goes too far occurs regularly, with Congress threatening intervention periodically to deal with the astronomical amounts of…

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Executive Compensation and the Board of Directors

Executive Compensation and the Board of Directors In most organizational, the board of directors is the major policy-setting entity. For publicly traded companies covered by federal regulatory agencies, such as the Securities and Exchange Commission (SEC), the board of directors must approve executive compensation packages. Even for many nonprofit organizations, Internal Revenue Service regulations rc;quire boards of directors review…

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Elements of Executive Compensation

Elements of Executive Compensation At the heart of most executive compensation plans is the.idea that executives’ should be rewarded if the organization grows in profitability and value ever a period of years. Because of the high tax brackets they fall in. most executives want their compensation provided in ways that offer significant tax, savings. Therefore, their  compensation packages are…

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Executive Compensation

Executive Compensation A history of executive compensation shows that a combination of events have created-today’s situation  the United Sta~s.21 Strong demand, the tax structure, stock market performance, and pay-for-performance notions have all contributed. Many organizations, especially large ones, administer executive compensation differently from compensation {or lower-level employees. U.S. executives-typically someone in the top two levels of an organization,  such as Chief…

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Organizational Incentives

Organizational Incentives An organizational incentive system compensates all employees in the organization based on how well the organization as a whole performs during the year. The basic concept behind organizational incentive plans is that overall results depend on organizational or plant-wide cooperation. The purpose of these plans is to produce better results by rewarding cooperation throughout the organization.…

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Problems with Team-Based Incentives

Problems with Team-Based Incentives The difference between rewarding team members equally or equitably triggers many of the problems associated with team-based incentives. Rewards distributed equally in amount to all team members may be perceived as “unfair” by  employees who, work harder, have more capabilities, or perform more difficult jobs. This problem is compounded when a poorly performing individual…

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Group/Team-Based Variable Pay

Group/Team-Based Variable Pay A group of employees is not necessarily a “team,” but either one can be the basis  for variable compensation. The use of work teams in organizations has implications’ for compensation of the teams and their members. Interestingly, although the use of teams has increased substantially in the past few years, the question  how to equitably…

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Sales Compensation and Incentives

Sales Compensation and Incentives The compensation paid to employees involved with sales and marketing is partly Ot; entirely tied to individual sales performance. Better-performing salespeople receive more total compensation than those selling less . Sales incentives are perhaps the most widely used individual incentive. Measuring Sales Performance Successfully using variable sales compensation requires establishing clear performance criteria and measures.…

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Individual Incentives

Individual Incentives As noted earlier, individual incentive systems try to relate individual effort to pay,” Conditions necessary for the use of individual incentive plans are as follows: • Identification of individual performance: The performance of each individual must be measured and identified because each employee has job responsibilities  and tasks that can be separated from those…

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Successes’ and Failures of Variable Pay Plans

Successes’ and Failures of Variable Pay Plans Even though variable pay has grown in popularity, some attempts to implement jt have succeeded and others have not. One study suggests that about 74% of companies have a variable pay plan o~me sort, Of those, most feel these plans have been successful in aligning p, with performance for executives (79%), managers…

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