Executive compensation main ppt
Download as PPT, PDF1 like1,644 views
This document discusses effective compensation management from GE's perspective. It outlines different types of compensation systems and notes strengths like flexibility but also weaknesses like inequities. It profiles former GE CEO Jack Welch and current CEO Jeffrey Immelt's compensation. It examines the board of director's role in aligning pay with performance and shareholder interests. It also profiles Whole Foods CEO John Mackey and his policy of limiting executive pay to 14 times the average employee. In conclusion, it questions whether CEOs deserve the high levels of pay they receive.
Executive compensation main ppt
- 1. Effective CompensationEffective Compensation Management – a GE ProspectiveManagement – a GE Prospective MGMT 6333 Human Resources Management Dr. Uche M. Nwabueze October 21, 2006 Presented by: Shailin Chokshi Valerie Reid William Ruddell Lyndell Scott Vincent Wedelich
- 2. Types of Compensation Systems Direct Indirect Non-Financial
- 3. Strengths Flexibility Customization to Company Customization Employee
- 4. Weaknesses Execution – Perceived Favoritism – Inequities – Low Morale – Frustration – High Employee Turnover
- 5. Management Method Then – Pay for Work Performed Now – Pay for Work Performed – Linkage with Goals/Objectives – Motivational Tool
- 6. Best Practice Job Descriptions Job Analysis Job Evaluation Job Classifications/Pay Structure Salary Surveys – Wage Rates Policy and Regulations Employee Communication & Training
- 7. • Chairman and CEO of GE 1981 – 2001 • Increased market value of GE by $400b • Joined GE in 1960 as a junior engineer with a starting salary of $10,500 • Fired bottom 10% of managers; bonuses to top 20% of managers • Stock options program expanded from management only to 30% of staff John Francis "Jack" Welch, Jr. Source: http://en.wikipedia.org/wiki/Jack_Welch
- 8. • Supports “free market” pay for top executives – opposes caps • Opposes SOX and similar type controls • Compensation in 2000 reported as $125 million* which included a salary of 4 million salary, a $12.7 million bonus, $57 million in options and $48.7 million in restricted stock grants • Retirement salary of $8 million a year, plus “perks” which increased compensation to an estimated at $20 - $50 million a year John Francis "Jack" Welch, Jr. * Source - http://www.esrc.ac.uk/ESRCInfoCentre/PO/releases/2005/June/index9.aspx? ComponentId=11053&SourcePageId=11077
- 9. Jeffrey R. Immelt Hand picked by Jack Welch as CEO since 2001 Over 20 years at GE, was president and CEO of Medical Systems Total compensation for 2005 was >29 million
- 10. Corporate Governance changes Expanded the size and scope of financial reporting Increased the number and ratio of independent board members Required executives to hold company stock Started expensing stock options Required a 1 year holding period on exercised stock options
- 11. The Role of the Board of Directors “The Board is fully engaged with the issues that are most important to the Company. We are an active Board, meeting at least eight times per year. Our insights and oversights are also complemented with at least two independent business site visits (without senior management present); in total making more than 30 visits last year.” Ralph Larsen Presiding Director
- 12. The Role of the Board of Directors GE had a total of 15 directors in April 2004 (compared with 19 in 2000), of whom 12 did not work directly for GE. Two-thirds of all directors were to be independent under the New York Stock Exchange (NYSE) guidelines for independence.
- 13. The Role of the Board of Directors To protect the shareholders assets and ensure they receive a decent return on their investment. Align compensation for the top 600 leaders with shareholder interests. Tie executive compensation to clear performance goals. Highest governing authority within the management structure at GE.
- 14. The Role of a Company’s Culture GE is a leader in every business it competes in. GE is looking for new leaders who will take them even further. GE offers the energy and initiative of a small company, with the strength and resources of a large company.
- 15. The Role of a Company’s Culture Immelt championed responsible corporate governance and the idea of the morally responsible CEO: “I think sometimes CEO’s forget what their job really is, which is to serve investors, serve employees, and lead companies. That’s what turns on the very best CEO’s I know. Money and power are just an outcome of that”
- 16. Do CEO’s merit what they are paid? We have reviewed the compensation system We have reviewed the Board of Directors roles. We have reviewed the governance system. Do CEO’s merit what they are paid? Are they really looking after the shareholders interests?
- 17. • CEO and Co-founder, Whole Foods Market • Open Whole Foods Market in 1980 • 1992 - 12 stores and $92 million in sales; goes public on NASDAQ • Fortune 100 best companies to work for since 1998 • One of the core values - Shared Fate Salary cap limits compensation of any Team Member to fourteen times average total compensation of all full-time Team Members in the company. John Mackey Source: http://www.4empowerment.com/en/community/expertspotlight/biz/mackey.jhtm Source: http://www.wholefoodsmarket.com/company/corevalues.html
- 18. Executive Compensation Is 14 times the annual salary fair? Is 29 to 50 million really in the best interest of the shareholders? Do CEO’s merit what they are paid? Question?? The End.
- 19. Works Cited Esrc.ac.uk. http://www.esrc.ac.uk/ESRCInfoCentre/PO/releases/2005/June/index9.aspx? ComponentId=11053&SourcePageId=11077 (Oct. 15, 2006) Wikipedia.com http://en.wikipedia.org/wiki/Jack_Welch Wikipedia.com http://www.4empowerment.com/en/community/expertspotlight/biz/mackey.jhtm (Oct. 20, 2006) WholeFoods.com http://www.wholefoodsmarket.com/company/corevalues.html (Oct. 20, 2006)