case study Executive compensation

The Widening Wage Disparity

The subject of top-level executive salaries in major corporations has received a lot of attention in recent years. This is mostly due to the widening wage disparity between top-level management and the general labor force. While corporate earnings have been steadily increasing, the minimum wage has remained relatively stable and has not changed significantly. According to Equillar (2017), the median top-level income reached $10.3 million, while the average full-time employee earned $41,132. Therefore, as much as the performance of the top level management has to be rewarded, it is still mandatory that we ensure that the interests of the company and the workers are also considered. This paper evaluates the compensation plan for AT&T and provides a critical analysis of whether or not it is in line with the current and future company prospects.

AT&T’s Financial Overview

AT&T is the largest telecommunications company in the USA AT&T has recorded over $163 billion dollars a figure that is higher than 2015 which was due to an increase in their IP services, DIRECTV and video usage (“Company Profile”, 2017). However, they experienced an increased burden of operating expenses associated with benefit plans and losses that saw a 14.8% increase from 2015. Nevertheless, the company has experienced a growth in subscribers which shows hope for the company sustainability. It is also seeking to capitalize on growing its subscribers through mergers and improvement of its wireless systems (“Company Profile”, 2017)

Executive Compensation and Remuneration

In this way, the company expects to have increased profits and growth in its international expansion. However, when it comes to paying and remuneration, the top level management still earns way much higher than the average worker. For instance, the CEO, Randal Stephenson, earns close to 100 times the average employee which is aside from the stock and option earnings and the value change in his pension.

The Overuse of Options

The larger percentage of executive compensation in companies such as AT&T is in options. It has thus become clear that companies have overused the ability of options in providing for compensation. In this way, the companies have turned their employees into gamblers who work on the stock prices to rise at times creating illusions that will favor a high cash in. Therefore, it is high time that executive compensation is closely knit to the organization’s goals and future prospects. One such way may involve issuing restricted stock grants rather than options as an assurance that the company executives own and work harder since the grants will be graded on performance. Although it still cannot be said that executives are not affected by the high risks of options, stock grants may provide the much-awaited reprieve in the remuneration of executive employees.

References

Equillar. (2017). AT&T Inc. - Management Team, Executives, Board Members - Equilar Atlas. People.equilar.com. Retrieved 19 April 2017, from http://people.equilar.com/bio/at-t-- inc./company/4531#.WPwara2cx_k

Company Profile. (2017). About.att.com. Retrieved 18 April 2017, from http://about.att.com/sites/company_profile