Essay on What Are the Advantages and Disadvantages of High Levels of Executive Compensation?

Words: 1172
Pages: 5

Tommy Le N8486666 Kasha – Class 07

Executives are often seen as the most crucial person in the companies. Their daily tasks involve both multifarious management and challenging projects in order to promote companies growth and achieve business goals in the competitive business environment. Therefore, most corporations tend to provide decent wages and welfare to executives for their great contribution and irreplaceable value. Although the right executives deserve high compensation, some people suspect that it might bring the heavy burden and potential risks to the companies. This essay will discuss both benefits and drawbacks of high levels of executive compensation. It will firstly consider the merits including affirmation and
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Furthermore, the corporations may meet the awkward problem that there is limited space for further incentives. The professionals, especially top executives, need inner satisfaction from their day-to-day activities rather than money. Sometimes, they can be motivated extremely by providing them with challenging projects and the autonomous right to manage their work (Robbins as cited in Agarwal, 2010, p.30).

The high levels of executive compensation may also bring potential risks to the companies. Executive compensation is a business expense, as Lawler (2009, p.32) emphasizes, if the cost of executive compensation is out of control, those companies will reduce corporate earnings accordingly. It is such a heavy financial burden for the companies especially during the economic crisis. When serious crisis happens, companies will encounter such a dilemma: if the companies decrease the compensation, they cannot retain the key executives; if the companies remain the same levels of compensation, they may suffer from capital shortage, and even “lead to uncontrollable


Tommy Le N8486666 Kasha – Class 07

risks” (Lin, Kuo & Wang, 2013, p.27). Moreover, the corporate reputation can be impacted by high executive compensation.