Rewards of managing

Managerial candidates differ widely in age, economic position, and level of maturity, they want many things, but these usually include opportunity, power, and income. Most managerial candidates desire the opportunity for a progressive career that provides depth and breadth of managerial experience. Related to this is the challenge found in meaningful work. Most people, but perhaps managers in particular, want to feel that they have the power to make a significant contribution to the aims of an enterprise and even to society.

In addition, managers want to be, and should be, rewarded for their contributions, although the size of the financial rewards has been criticized.

There is, however, some concern about whether the shareholders get their money’s worth and whether the compensation is fair. The Fortune survey, mentioned in the Perspective, found that compensation of CEOs in the industrial companies increased by 25.3% when adjusted for inflation. But the return on the equity of shareholders decline from 13.3% in 1976 to 11.5% in 1986. At times, then, there is little correlation between executives pay and performance. In another survey, 76% of the public thought that top executives are not worth the compensation they receive. One study found that their salaries and bonuses increased by 12.2% annually over a 10-year period ending in 1987. During the same time, wages of hourly workers rose only 6.1% per year and profits only 0.75%.

One can also compare the compensation of top managers in other countries. Even with the weak dollar, CEOs in the United states earned about 40% more than those in Japan, more than twice as much as those in Great Britain, about 3.5 times as much as top managers on Australia. Moreover, in US firms, the compensation of CEOs, on average, was about 14 times that of colleges graduates entering their companies; in Japan, it was 10 times as much; and in Australia, 4 times as much.

Peter F Drucker, one of the most perceptive writers on management, suggests that if executive pay is not reformed Congress will do it. In Japan, known for its high productivity, executives receive about 8 times the pay of blue-collar workers. In the United States, the multiplier is much higher. American workers, professionals, and managers are outraged by what they perceive as exorbitant pay for top executives. Unions, for example, were requested to make concessions, only to find out later that executives received high bonuses and stock options.

Comments are closed.