From theory to practice

The topic of today is “executive pay”.

Task 1

Read the information below to get the general idea:

It is a common practice for every company to have its own remuneration policy based on internal rules and certain criteria. In other words, the level of your monthly payment basically depends, among other factors, on your position in a hierarchy, overall experience and performed duties. The higher up the ladder you are positioned, the more money you can expect to get.

In theory, the above mentioned model seems perfect, but in practice it does not always work so smooth. In particular, doubts are cast when it comes to top CEOs, who are sometimes referred to as “fat cats”. By definition, they earn unbelievably and unreasonably high salaries along with other perks and rewards, even despite poor corporate results. They also receive generous pensions and retirement packages, consisting of extra compensation (so called “guaranteed bonuses”), which are hardly ever available to other company employees. Additionally, to secure their future, fat cats are also frequently offered special, yet very attractive severance deals (known as “golden parachutes”), in case the Board unexpectedly decides that they should leave the company quietly or without a legal fight. Even if things are going bad in a company, the money has to be paid; but is it fair? Should remuneration committee members reward failure or rather success?

In conclusion, “theory helps, but there is art to applying it”. (unknown)