Question

what are the pros and cons of bonus pay for executives (ceo)?

Answer 1

Pros:

1. The CEOs can be made more accountable for their actions.

2. These bonuses can be linked with meeting targets set by the board of management and hence the CEOs can be incentivised for meeting targets

3. Top performing CEOs are always on demand in the industry. A high bonus may keep the CEO from moving away from the organization and create loyalty.

4. The bonuses can also be in the form of stock options which may actually help the CEO and also the investors of the business.

Cons:

1. The bonuses may be very high and these may have to come from the profits of the company which may not make the investors very happy.

2. The bonuses may make the pay check for the CEO very less and the business may have a hard time finding a new CEO.

3. The CEO becomes too focused on meeting the targets to get their bonus and hence may not act in the best interest of the shareholders.