Should we care about executive compensation or how much hedge fund managers earn
ID: 2613022 • Letter: S
Question
Should we care about executive compensation or how much hedge fund managers earn? How should incentive compensation be changed? Should it be changed? Who can change it? Southwest Airline's CFO hedged fuel prices and saved the company hundreds of millions of dollars. Why was he alone in the industry in doing so? John Paulsen (admittedly controversial) made his partners $20 billion over the past two years mostly by correctly forecasting the housing market and the problems in the banking industry. They paid him over $4 billion for his work.
Explanation / Answer
Executive compensation refers to the financial pay and other perquisites and non financial benefits being given to a an executive by an organization. These days the compenstaion being paid to senior executives in the CXO level has specially become an area of debate in the corporate world. Current studies and research suggests that the CXO level executives are paid huge sums of money. The amount of pay disparity within the CXO level and the lower level is huge and growing everyday in many companies.
Many countries now have provisions which makes it cumpolsary for companies to disclose all relevant information on executive's pay in their annual reports. The stakeholders in an organization have every right to care about it and have information and knowledge about it.
We should not care so much about the hedge fund managers. The payment to these managers have a basis and the basis is followed in case of most of the funds. The manager receives an annual management fee (which is usually 1% of the assets being managed) and a performance fee which is based on the returns that the fund is generating.