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Executive Compensation/Managing Labor Costs

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1-In 2008, Pratt estimated that executives received more than 360 times the pay of the average worker (as cited in Milkovich, Newman, & Gerhart, 2011). What are the components of executive compensation? Why is there concern about executive pay today? I'm sure you've heard President Obama's stance on this subject. I look forward to hearing your perspectives.

2-Compensation programs are managed to assure that the total compensation is aligned with organizational goals and strategies. There are the right number of employees with the correct skill sets, and they are paid at the appropriate level and within a budget that is affordable to the organization. How can labor costs be managed? What tools are available to HR?

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Solution Summary

This solution discusses components of executive compensation, and the concern over it. It also outlines how labor costs can be managed, the tools available to HR. It includes links and examples.

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1. Components of executive compensation include salary, bonuses, perks, stock options (including shares, restricted stock, and call options.). The stock options are valued at the value a company places on the stock. Executive salary also includes any interest on "deferred pay that's above market rates"(http://www.forbes.com/feeds/ap/2011/05/09/general-broadcasting-amp-entertainment-us-ceo-pay_8457693.html).

There is concern over executive's pay for several reasons- the amounts seem astronomical to the average person. According to Forbes the median pay for CEO's was $9 million. This is a huge figure, and it is the highest since the Associated Press started analyzing executive pay in 2006. This is all the more mind boggling at a time when foreclosures are at an all time high, the housing market is in a slump, fuel prices are up, there is weak job growth, and the majority of worker's pay is stagnate. The average American is bombarded by increased costs and little change in compensation, meanwhile executives' compensation is ...

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  • Ed.D, Boise State University
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