A Struggle To Reward Good Executives

by J. MacDonnell



This article focuses on incentive planning on the part of companies in order to retain their executives. Business is caught in a dilemma; competition for key executive personnel forces it to offer incentives, yet the better part of any monetary incentives are gobbled up in taxes. Several plans geared to meet this problem are being tried by various companies. It is the purpose of this paper to report and evaluate the most widely used of these plans. Because current high tax rates scoop the cream off executive salaries, business today is faced with the problem of finding new ways to offer incentives that will attract or retain competent management. Too often, mere salary increases are meaningless to executives in the higher tax brackets. These executives may retain only 20 to 30 cents or even less of each dollar of their increase. And it is no secret that many companies look with some disfavor on the fact that the greater portion of an executive salary increase finds its way into the coffers of the United States Treasury when the company could have retained the money at a maximum corporate tax rate of 52 percent.

California Management Review

Berkeley-Haas's Premier Management Journal

Published at Berkeley Haas for more than sixty years, California Management Review seeks to share knowledge that challenges convention and shows a better way of doing business.

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