CEO Pay & Salaries – How CEO’s Compensation is Decided

The article gives some basic information on CEO Pay & Salaries – How CEO’s Compensation is Decided. With the economic downturn over the past year or so, many have wondered just who it is that decides CEO salaries and just how these salaries are determined. After all, if a CEO sets the salary ranges for his or her workers, just who determines his or her compensation? In typical companies, the board of directors will set the salary for a CEO.

CEO Pay & Salaries - How CEO's Compensation is Decided

A board of directors for the company normally selects a subgroup that is in charge of setting the compensation for the CEO. The pay for that CEO is divided into two parts. The first part is a reward for their job within the company. The second part of the salary is considered bait. It is used to entice the CEO to stay with that particular company instead of looking for a higher paying offer.

Of course, the actual compensation for a CEO will depend on the particular company in which he or she is employed. Many firms compete with each other to “steal” away their leaders and these companies may offer a higher salary range for their Chief Executive Officers than smaller companies.

Committees that are chosen to determine the pay for a company CEO may use their own discretion and award that particular leader what they feel that he or she deserves by what he or she has done for the company overall.

There have been many claims in the past however, of abuse by these committees. Many claim that committee members at various companies have relationships with the CEOs, thus giving them a higher rate of salary. Because of claims such as these, many companies now use compensation consultants to help committee members to determine the pay that each CEO should receive.

Many believe that the CEOs for all companies should be paid what the market will bear. Others argue that if this is the case, then all CEOs should basically be receiving the same compensation. The truth is that until all companies will determine for themselves just how valuable their CEOs are and what they should be paid.

If a CEO is highly successful and leads their particular company to financial success, then the company may reward him or her with an astounding salary package. If the CEO or company president does not help the company to show growth, then the salary may be less than desirable or the CEO may find him or herself looking for greener pastures.

Leave a Reply

Your email address will not be published. Required fields are marked *