Critique and Evaluate Considerations That Are Traditionally Used to Determine Ceo Compensation

CEO Compensation

Critique and evaluate considerations that are traditionally used to determine CEO compensation.

Finding out the compensation to CEO’s is not always easy, in fact, its hard reading the newspaper without coming across the salary, bonuses, and stock packages of CEO’s for public companies. However, most companies use the theory of compensating CEO’s salary based on the performance of the business success. “While everyone can support the idea of paying for performance, it implies that CEO’s take on risk: CEO’s fortunes should rise and fall with companies' fortunes” according to investopedia.com. Most CEO’s receive well over $1 million as a base salary; however the performance of the company determines the incentives such as bonuses and stock. To determine the compensation and who plays a role in determining that, the CEO writes a formal letter about his or her appraisal, in which, he or she discusses actions that need to be taken and the behavior self-assessment. The CEO than submits his or her letter to the compensation committee for further evaluation and that committee determines the results achieved throughout the year and determines the level of compensation rewarded. According to the website accenture.com “the Compensation Committee has primary responsibility for reviewing and approving the compensation of the Company's CEO and other executive officers; overseeing the Company's benefit plans; and reviewing and making recommendations to the board of directors regarding compensation of the non-employee directors”. To have a more accurate report, members of the committee should meet frequently face-to-face or through computerize electronics to communication with one another simultaneously. The committee team analyzes the current year performance with previous years and compares those with the goals that were implemented from top executives. When that information has been evaluated, the compensation committee delivers its results to the board of directors for those members to discuss the CEO’s feedback of performance. The Board of Directors are a group of people that have been elected by the owner of the company, in which the group is responsible for hiring the CEO, setting the compensation policies, and evaluating the CEO performance. “The primary responsibility of the board of directors is to protect the shareholders' assets and ensure they receive a decent return on their investment” (Kennon, 2013). During the evaluation meeting, the board discusses the CEO’s overall performance and compensation plans. Once the discussion has concluded, one of the board members talk with the CEO about the overall feedback received from the meeting.

Create a matrix or sample evaluation tool that details the factors you believe CEO compensation should be measured by in