Posted: May 11, 2021
Over the last 20 years, there has been a consistent conversation recently surrounding the size and volume of large CEO compensation packages. On average, the total payout from these packages is anywhere from $10 to $30 million. A $30 million salary comes out to over $82,000 per day and more than $10,000 per working hour. The sheer size of these figures begs the question: what do CEOs do to earn such large compensation packages? How did we get here? Executive compensation packages began to increase in size and scope in the 1980s and 90s. In 1993, Congress stated that corporations would be allowed to write off executive compensation as long as it was tied to performance. This was meant to discourage overpaying CEOs, but it completely backfired. Instead, executive compensation became something that was largely tied to the value of assets such as shares of company stock. Around this same time, the United States enjoyed a massive bull run which propelled stock prices upward. CEO compensation ballooned and has never truly returned to the way it once was. So how do CEOs rationalize getting paid these incredible salaries? Leadership Optics are important, and as such the CEO often serves as the face of the company that they are employed by. CEOs are often chosen for their unique vision, charisma or other characteristics - not only to improve a company's image in the eyes of the public, but also to provide direction and inspiration for the company's general body of employees. They're often chosen for their specific work experience in the hope that their unique knowledge will help them steer the company towards increased profitability. Some large corporations subscribe to the notion that the success of a company is nothing without an intelligent, charismatic and experienced CEO -- and they are willing to pay what they need to get the right person in charge. Decision Making CEOs and the C suite also have the most influence on the success of the company. It is up to the CEO and the executive team to put their employees in the right position to be successful and thus drive the success of the company. It helps when you have all-star players, but the best CEOs will be successful with just about any workforce. Putting the right person in charge can turn an entire organization around, or at least put it on an increasingly profitable trajectory. Relevant Experience When making a critical hire like the CEO, experience goes a long way. The board of directors wants to put someone in charge who has a history of being a successful leader. It’s very risky to put someone at the helm who has no leadership experience or has never held a management position. The list of individuals who have the sort of management experience that boards look for is a short one - with low supply, seasoned corporate leaders will always be highly in demand, and will come at a proportionally high price. To learn more about maximizing executive compensation, visit our Contact Page, or contact us directly by email at email@example.com or by phone at 415-618-6060.