CEO Compensation: Consequences and Effects on Agency and Equity Theory

CEO compensation

INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Human Resources Management (HRM) may be described as handling staff efficiently
within an organization (Gerakos, Ittner and Moers, 2018). HR management provides the
connection between the success of the staff and the corporate priorities of the organization. In
fact, an effective HR management team will give businesses a competitive edge in their rivalry.
HR manager plays essential role in the organization where they perform several activities such as
employee’s training, motivation, compensation, rewards etc. This essay based on the topic of
CEO compensation which increases in comparison to last year. It has several consequences
which affect the agency and equity theory.
MAIN BODY
CEOs have various degrees of management ability and are highly competitive suited to
businesses. This is believed that the incremental influence of talent for a CEO would grow with
the valuation of the company under his management (Glikson And et.al., 2019). The model
generates accurate hypotheses of CEO pay along all firms, over time, and among nations. In
comparison, a model benchmark design indicates that the recent growth in CEO pay is an
effective optimum reaction to firms' improved market demand, rather than a consequence of
agency problems. The greatest CEOs afford the largest firms in our equilibrium model, since this
significantly increases their influence and economic efficiency. By targeting their protest
movements at compensation levels, unwelcomed but impactful guests at the management
negotiating table intimidate members of the board and restrict the contract terms among
shareholders and managers which are specified among both of them.
CEO compensation has markedly increased in proportion to average pay over the last
decades. Between 1978 and 2018, the CEO’s rewards increased by 1.008 percent, while the
average worker’s compensation improved by 12 percent. In 2018, on average $17.2 million has
been paid to CEOs of the top 350 firms in the world. Workers in those sectors from retail to
development and production usually paid $64,500, researchers said. In 2017 and 2018, equity
awards and cash-in stock options received CEO salary of $7.5million. Integrating equity into
compensation structures is one way to encourage CEOs and increasing salaries reflect the C-suite
job market, some analysts claim.
1