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| *Resource of HR>>>employee benefits |
Why do corporations choose to cut employee benefits, but keep top managment with golden umbrellas? |
Everyday you hear this industry or that industry cutting benefits and wages to thier employees and then hear that the CEO has multimillion dollar retirement package. The purpose of the corporation is, at its essence, to make a profit for the shareholders. When a corporation starts to lose money, it usually has to cut costs. Since most corporations have 80% of their costs wrapped up in people, it seems pretty likely that the people will take a hit. This can be in lost jobs, or reduced salaries/benefits. In some jurisdictions, this is easily accomplished, while in others, employees must be compensated when they are terminated. The CEO is hired under a contract. Typically, that contract will include protections on their employment, and compensation if it ends. There can be different kinds of benefits. You have to consider that CEOs often last only a short time before they are terminated - even in jurisdictions where there are substantial protections (i.e., not employment at will). Once terminated, it can take executives, particularly CEOs, as much as two years to find similar employment. To attract the best CEOs, companies have to offer these protections, or they will lose them to their competitors. In short, it comes down to basic economics - supply and demand. There is generally an ample supply of workers to handle the jobs, and a varying demand for them. At the same time, there is a perceived shortage of competent CEOs, and a generally steady demand. CEOs are more valuable to a company on average than an average employee, and they are able to negotiate better compensation arrangements. As far as suggestions of collusion with the Board, I think this is over-stated. The Board sets the CEOs compensation - usually well in advance of whatever event triggers the payout. While the CEO may get to recommend the slate of directors, it is up to shareholders to approve. Shareholders own the company; if they don't like what is happening, they can change it. And if you like, or don't like, the particular way a company is run, you can make your investment choice accordingly. E.g., you can choose to invest in Ben&Jerry's - or you can be an activist investor and invest in their competitor and then try to change it. This can create a market for more equitable policies. Source(s): MBA, life experience because it's the top management that make that decision. Would you decide to cut your own pay and benefits? I think this sucks, the little people always get slashed, but it's usually due to the top managements poor managment of the company. But thats the way it is. The CEOs are the ones deciding what cuts need to be made. Why would they cut their own pay? It is pure stupidity...plain and simple. It's one of the reasons I like Ben & Jerry's Ice Cream so much - they have a policy that limits how much the highest paid employee can make when compared to the lowest paid. At least they used to anyways. Because most CEO's "stack" their company's board of directors with friends and aquantinances. So when they retire, the board sends him off with a "golden parachute" and everyone's happy except the employee(s). The management being kept are usually the ones making the decisions to cut people or benefits. The worst part is the reason for the cuts are usually a direct result of the managements poor decisions. When a company is going down, the upper management and executives are the ones that should be cut. They require the most money, and cost the company the most. This will never happen, becuase the same people that make the cuts are the ones that should be cut for the company doing bad and not turining enough of a profit. |
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