Page 148 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

134 The Complete Guide to Executive Compensation

Some organizations now include customer evaluation of products and services, making
this a part of the annual incentive plan calculation. Obviously, customers could also be share-
holders and thereby influence executive pay in that aspect. Other than a moderate interest in
annual incentives that include customer concerns, to date customers have had a low interest
in executive compensation.

THE SUPPLIERS

The quality, price, and availability of supplier products and services have a direct effect on
the ability of the organization to supply its customers, which determines its financial success,
which in turn has a direct effect on executive pay. How a company looks at its suppliers is a
major issue. Is the focus short term or long term? A short-term focus examines price,
quality, and supply time. The long term looks not only to ensuring suppliers stay in business,
but that they prosper. There may be a time when the organization will need financial
assistance from its suppliers, for example, extended credit if it comes upon difficult times.
Companies have found that driving down the price of its suppliers may put many out of
business. What happens when there are only one or two left and they can sell their products/
services elsewhere?
Although suppliers are looking for long-term, predictable relationships, to date, suppliers
have expressed little interest in executive pay, as shown in Table 4-14.

Incentives

Time Period Salary Benefits Perks Short Term Long Term
1900–1924 Low Low Low Low Low

1925–1949 Low Low Low Low Low
1950–1974 Low Low Low Low Low
1975–1999 Low Low Low Low Low

2000–Present Low Low Low Low Low
Table 4-14. Supplier interest in executive compensation

THE COMMUNITY

The community is truly a stakeholder. It relies on companies to provide a large taxable
revenue base (of corporate earnings and employee pay) and plenty of good-paying jobs, all
the while preventing any negative environmental impact. To the extent these happen, the
community has little interest in executive pay; to the extent this is not true, the community
uses the business press and the rulemakers to influence the company.

Business Press
Business newspapers (or business sections within general information publications), magazines,
and television cover special events on executive pay in addition to detailing a compilation of