Executive Compensation Research Paper Example | Topics and Well Written Essays - 750 words

Executive Compensation - Research Paper Example This essay demonstrates that Stumpff (2011) lamented that in the past three decades, executive compensation has been on a steady rise contrary to the growth of the average salary for employees, companies’ profitability, and even the national economy. In particular, between 1984 and 2004, it is reported that the executive compensation had recorded as the steady growth of 8.5% annually whilst the growth of company’s profitability only grew by 2.9% annually and the growth of per capita over the same period was only 2.9%. Stumpff (2011) further added that by 2006, company executives were earning 400 times more than average employees in America and the compensation was seemingly pegged on the size of the company and not necessarily the performance of the company.In a natural sense, if executive compensation was a reflection of a company’s performance then there would have been an equal growth of employees’ compensation to reflect the increased profitability. Mo reover, if the executive compensation would have been directly pegged on the financial performance of a company then it would not have recorded a steady growth, this is because the cyclical nature of business performance would have equally meant that executive compensation fluctuates rather than remain steady.   Conclusively, this present study asserts that executive compensation does not necessarily reflect the financial performance of an organization and also at times, it is excess especially when a company is performing poorly.