Determining Executive Pay
Introduction
For human resource managers, determining how a company will compensate its executive staff such as Chief Executive Officers is one of the most important activities. The importance of getting the executive pay right stems from the fact that executives are key members of the company and have the influence to determine the trajectory of the company. Therefore, ensuring that the compensation they receive is enough to motivate and retain them is top priority for the company.
Body
In the process of determining how the executives will be paid, human resource managers consider a number of things. Firstly, the complexity of what the executives will be required to do for the company is considered. The complexity of an executive`s job is determined by the number of activities which he/she will be involved with directly, the number of people he/she has to worth with directly and the hands-on management responsibility. Secondly, the human resource mangers also consider the qualifications of the executive in question. These include the education level, the work experience, previous notable successes and area of expertise. Finally, the company`s profitability determines the compensation package offered to the executive. Profitability is an important consideration because it informs the amount of financial resources available for payment purposes. The company therefore calculates the executive according to the income it generates to avoid payment packages that will be detrimental to the company`s financial stability.
Conclusion
The determinants of executive pay as described above steer the company towards the correct payment packages. It is, therefore important for the board in each company to ensure that the pay given to executives are within the boundaries drawn by the determinants.
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