The corner office comes with its burdens—from consumer and supply chain worries to a delicate dance with employees and competitors—but the perks are good.
A WWD study of executives at the top of the org chart in US fashion, retail and beauty found 29 corporate CEOs and executive chairmen who received pay packages of more than $10 million in the most-recently reported fiscal year.
The process of setting pay for top executives is motivated by retaining corporate talent and aligning their interests with those of shareholders. The people who rise to the top of multibillion-dollar corporations are already very motivated, and one way or another, have been very successful and been making good money for a long time.
“They are also super competitive,” said Jannice Koors, senior managing director and head of consulting services at Pearl Meyer. “That’s how they got to where they are—it’s almost like executive compensation is a bit of a competitive sport.”
And the competition keeps getting tougher as CEO packages move higher.
“It’s no different than an accountant who walks into their boss’s office and says, ‘The accountant who sits next to me gets paid more than I do. How come?’ The CEO’s numbers have more zeros behind them, but it’s the exact same argument.”
It is a powerful argument that’s helped along by the fact that, while investors have to approve allocations of stock for executive compensation, that kind of pay doesn’t hurt the company’s cash flow.
“When I pay you a salary, when I pay you a cash bonus, that is real cash coming out of the company’s bank account,” Koors said. “When I give an executive a share of stock, it’s like payment in kind.”
That payment comes in several different flavors, she said. They include restricted stock that is given to the executive as it vests, stock options that offer them an opportunity to buy shares at a certain price in the future, and performance shares that are tied to company metrics.