While evaluating salary using an external equity method is important for staying competitive (Pynes & Lombardi, 2011), it cannot be the sole deciding factor in the decision of compensation and benefits for a chief executive. Jarque & Muth (2013) discuss how the compensation that is reported by other organizations are showing the “expected value of compensation […] and the realized value
Evaluating executive compensation packages-Discussion Board Replies- Nursing
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Discussion #1-Chief Executive
According to Meeks (2015) an individual being the Chief Executive Officer (CEO) has the primary job of navigating the organization not only through external, but also internal changes and climates. A chief executive and their organization have often been criticized for their compensation, but one argument is the compensation is high because the chief executive must have a vast array of skills in order to succeed at their job.
Compensation
While evaluating salary using an external equity method is important for staying competitive (Pynes & Lombardi, 2011), it cannot be the sole deciding factor in the decision of compensation and benefits for a chief executive. Jarque & Muth (2013) discuss how the compensation that is reported by other organizations are showing the “expected value of compensation […] and the realized value […].” (p. 252). This should lead a board of directors to evaluate other determinants into deciding what they will compensation package they will offer to their chief executive. Two of those determinants to consider would be education and experience. Although looking at a competitor who pays their chief executive $300,000 perhaps that individual has a doctorate degree, and the individual getting the offer from your board of directors has a masters degree. As it is typically understood, the more degrees an individual has, that pertain to their career choice, and the level of degrees they have equates to being paid higher salaries. What the degree(s) are in, is also an important factor for evaluation into the education differences. A board of directors needs to ensure the candidate has the correct skill set needed to perform the job and this can come from their educational background.
Experience can also lead to a difference in compensation packages, because typically the more experience someone has in their specified field, the more they will get paid because of the knowledge they have gained. The board will want to ensure the experience gained pertains to the responsibilities of being a chief executive for their specific organization, which will be reviewed in the next section, and what performance reviews they received. 1 Timothy 5:17 (NIV) states “the elders who direct the affairs of the church well are worthy of double honor, especially those whose work is preaching and teaching.” This shows that even God teaches us that if you are a good leader, and your performance led the organization well, then you are worthy of more. In the case of a chief executive, one who has multiple years of experience and high-performance reviews should be worth more, therefore, they should get compensated more than someone who does not have similar determinants.
Responsibilities
Pynes & Lombardi (2011) discuss that chief executives, as well as other executives in healthcare are compensated differently than other healthcare providers, but does a difference in responsibilities play a significant role in that differentiation? While the amount of responsibilities may be similar between a chief executive and other healthcare employees, it is the specifics that differ. The chief executive is responsible for “planning, organizing, staffing, directing, coordinating, reporting, and budgeting.” (Meeks, 2015, p. 95). Within each of these seven categories of responsibilities are further subsets, but each of these also equals a significant time commitment, amount of communication with numerous people, and a significant amount of knowledge in numerous subjects. Looking at other healthcare employees, they may also have a responsibility to communicate and do administrative related tasks that take time, but their primary responsibilities could be to provide patient care. With this, they would focus on their patients, and any co-workers within their department or the occasional cross-over of departments, where as the chief executive must every day oversee evaluating and leading the entire organization. As Pynes & Lombardi (2011) mention, the amount of responsibility and public scrutiny that a chief executive officer must or could endure leads to their positions not being steady if they are not up to par on their responsibilities.
It is the shear volume of people that a chief executive officer is responsible for as well as their specific responsibilities that require significant amounts of time and specific knowledge, that can lead to the argument they should be paid more. As 1 Timothy 5:17 (NIV) taught us, that those that are doing their responsibilities and leading well, should be rewarded more. However, how much more they do or could be paid is a discussion for another time.
References
Jarque, A., & Muth, J. (2013). Evaluating executive compensation packages. Economic Quarterly (10697225), 99(4), 251-285.
Meeks, M. D. (2015). Strategic management and the disparate duties of the CEO. Academy of Strategic Management Journal, 14(2), 93-116.
Pynes, J. E., & Lombardi, D. N. (2011). Human Resources Management for Health Care Organizations. San Francisco: Jossey-Bass.
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