Question

In a short paragraph, discuss specific problems with traditional executive compensation strategies. Please be specific.

In a short paragraph, discuss specific problems with traditional executive compensation strategies. Please be specific.

Homework Answers

Answer #1

Traditional executive compensation strategy lacks on different aspect like objectivity, scientific nature and static one. Now executive have much more role in success of the firm and due to change of time executive need to be proactive, dynamics and drive the process. Traditional compensation package suits in those environments where everything is process driven and just extension of the present. Here more role of executive is on organizational and leadership skill. When we analyze the present-day business, executive have more role of strategic decision making, risk taking appetite and how they perceive business. Traditional executive compensation lacks paying executive based on the degree of their decision. Only comparing top line and bottom line won’t be proper to decide compensation. It should be based on the circumstance of decision taken, prevalent macro-economic situation etc. These traits and situation under which executive drive the firm should be compensated based on their performance. This cannot be achieved by traditional system.

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