INDIVIDUAL COMPENSATION PROJECT GUIDELINES. Business & Marketing Essay

Individual compensation project guidelines Name Institution Date
 Searching and retaining top performing CEOs is important and compensation is one of the factors that influences the recruitment and retention of CEOs in publicly traded firms.  There has been greater scrutiny on executive compensation plans, since the CEO pay has increased more rapidly than the average worker’s pay, some who have not had pay increase in years (Lazonick & Hopkins, 2016). There is no one single criterion used to determine if the CEOs compensation in reasonable, high or low, as this partly depends on the goals assigned, contractual obligations and performance. Compensation plans for private sector CEO’s in North America are high and unreasonable. Performance-based incentives influence CEO compensation, and the best performing executives are rewarded and the investors are more likely to vote in favor of such executives when the performance is consistent.   However, executives are overpaid and the other workers underpaid, and this is not just the salary, but the many benefits in the compensation plans. Even in cases where the CEOs are ousted before their terms end, they tend to receive big compensations, and this is further complicated by the underreporting, which is not open to the public (Hopkins and Lazonick, 2016). The stock-based pay is one of the most common measures to estimate executive compensation, but  are at times underestimates and in many cases  the actual realized gain are higher, yet this is hardly reported in annual reports. Even when the markets and industries are turbulent, the best performing CEOs tend to outperform others and are rewarded well for this. The growth in executive pay in North America reflects the changes in corporate world over the past four decades where the growth in CEO compensation has outpaced earnings and shareholder returns.   Today’s CEOs do not necessarily outperform those of previous eras, yet there is too much focus on short-term profitability rather than long-term viability. Furthermore the all-out incentives approach has resulted in CEOs earning more from compensations far beyond their base salaries in Canada and the US, which is atypical when compared with even other industrialized countries.Managers perform different vital functions for diverse companies, while the type and amount of compensation also differs for each firm, but there are executives who get raises even when performance does not meet expectations. The notion that firms have to compete for top talent has meant that many corporations have had to raise their compensations to CEOs to retain them without necessarily increase competitiveness (Connelly et al., 2016). Furthermore shareholders activism in North America and the quest for higher returns are associated with many cost-cutting measures yet improved efficiency, productivity, and innovation facilitating term success. The CEO pay gap has been a high for decades, as the payments are largely unregulated in the US and Canada, where the pay depends on the prevailing market rates in North America.  However, there was greater scrutiny and public awareness on how these compensations plans influence CEO behavior in the wake of the 2008/2009 global financial crisis and especially the financial services service firms.   The CEOs increasingly take excessive risks to get higher returns, yet they may risk the future growth of t he companies if the risky ventures do not go according to plans. At the same time, the firms focus on improving generous compensation packages, but are resistant to publicizing and letting the various stakeholders know about these packages.  Wells (2018) highlighted that the average Canadian CEO makes 209 times more than the average worker, yet the huge compensation plans have not always translated to long-term stock performance.  Pay practices focus on the executives yet other stakeholders including workers and the shareholders are essential the success of the CEOs. Regardless of a CEO’s experience and skills, if the workers are poor performing high CEO compensation will not translate to greater productivity in the workplace. Long-term incentives are more effective to attract and retain top talent and the executive work for a specified period of time. As such, it is likely that CEOs mainly focus on the period where they are at the helm, and new CEOs may need to change some strategies based on their expectations and desired outcomes (Takacs Haynes, Campbell & Hitt, 2017).  The generous compensation plans to CEOs is not sustainable, yet focusing on sustainable, long-term performance is essential to the success of the firm, competitiveness and productivity. Increasingly, the shareholders approve highly paid CEOs based on fear that if there is poor performance this will affect their earnings. Typically, pay is linked to performance, but the compensation plans for CEOs are high and unreasonable in North America as they incentivize short-term profitability, but even when companies are performing poorly se CEOs are still paid huge big salaries. Besides the bonuses, and various economic and financial benefits, many firms have internal and external equity policies, and this mainly changed from the 1970s when executive compensation consulting beco...