It is true that talented top executives are among the highest paid workers; however, long hours, and intense pressure are coming with the job. Working as top executives of private companies is not an easy task as there is intense pressure to succeed in competition with rivals.

Their job is not to make technical decisions but they devise strategies and policies to ensure that an organization meets its goals. They plan, direct, and coordinate operational activities of companies and organizations. We should also note that salary levels are driven by supply and demand.

Leadership always associated with power and the top management are linked with Legislative power and Reward power. With that, they can determine their reward scheme.

At the same time, when justifying their salary and wages, the main criteria is on the high responsibility of decision making and the high level of risk they are burdened with.

On economic and financial perspective, their salary wages  should reflect the revenue and income they would generate for the company.

Dear Umer,

This is a too complicated question. Top managers and bosses in optimal cases are very good organizers, know the operating of systems, can formulate and express the philosophy and the determinant paradigm of a given corporation or institute as well as represent the interests of the proprietors.

It is true that talented top executives are among the highest paid workers; however, long hours, and intense pressure are coming with the job. Working as top executives of private companies is not an easy task as there is intense pressure to succeed in competition with rivals.

Their job is not to make technical decisions but they devise strategies and policies to ensure that an organization meets its goals. They plan, direct, and coordinate operational activities of companies and organizations. We should also note that salary levels are driven by supply and demand.

The top management does not usually have the technical expertise that the technical team under them has. However, their overall organizational knowledge, their understanding of nitty-gritties, and ability to liaise with and oversee all other departments, makes it more appropriate for them to conduct the final decison-making process.

In terms of management skills, it is highly variable and may differ from one supervisor to the other, depending on multiple factors.

In so far as your point on authoritativeness is concerned, it is sad but true that in a materialistic profit-driven world, certain attributes like authoritativess are given more due than they deserve. However, authority does not always have to authoritative. The best managers always put the 'we' before the 'I' and are natural leaders who do not need to enforce or impose, at least not in a way that it seems enforced or imposed. With an increase in flat hierarchies in many industries, the days of the bossy boss may well be over.

Dear

Noor Azman Ali

András Bozsik

Behrouz Ahmadi-Nedushan·

Monica Bhattacharjee

I agree with all of you that top management do takes maga risks , leads and overall responsible for the all the strategic decisions that may leads a company towards dawn or dusk but still i say that there must be power and decision sharing authority among the management and the team ; i mean empowerment  

Hierarchically people in top are accountable to the total deliverable. People who reach there are normally with rich experience and are part of the big picture of the organization goal. Analogous to a Human Body, the Top is "Psych" and other parts are "Motor" components. Both need to coordinate to achieve a particular activity.

Hi Umer. You are absolutely correct that every one in the organization is responsible to the healthy running of the business operation. Some how the top management bear more strategic responsibility to ensure the company's survival and its future position. In determining their salary and wages, they should do it with full responsibility that it won't jeopardize the stability of the company. At the same time, the staff should be well compensated and fairly according to everyone's contribution and involvement towards the organization's performance.

Profit, yes dear @Roland. They are the most responsible for profit and the operations of the company! I would say that performance-related-pay for managers should be a good approach! Performance Related Pay (PRP) approach could be applied to all employees!

http://www.ecommerce-now.com/images/ecommerce-now/PRP.htm

To spearhead the Organization and navigate over all the economic rough weathers, sees to the Organization survives the onslaught of competition and profitably maneuver the market is no small means of success; hence it is worth paying them on the percentage of turnover (EBIT- Earnings before Interest and Taxes); We have been planning on EBITA (A- Amortization) a few years ago (2010) after which the recession struck us, we changed our plans to simple arithmetic latter.

A nice article from Harvard Business Review:

“How much should CEOs be paid?” is the wrong question to be asking right now. The right questions are: “How should they be paid?” and, just as important: “Should changes in the way CEOs are paid be mandatory or voluntary?”

Pay must be structured to attract the right executives and give executives effective incentives to lead their companies to great performance. The poor showing of too many firms, despite ample CEO salaries and equity packages, and excessive compensation at times of poor performance shows that pay typically isn’t structured correctly and that executive compensation practices need serious reform.

All too often, executive incentives are based mostly on short-term financial metrics and shareholder returns. Financial results are the consequence of a firm’s strategy formulation and implementation. Effective incentive systems should focus on effective organizational learning and growth, process improvements, and customer-related metrics and milestones. In addition, companies should design compensation packages to attract the right people for implementing the company’s strategy. For instance, below market salaries coupled with aggressive incentive pay linked to individual performance is likely to attract self-motivated entrepreneurial individuals.

http://blogs.hbr.org/2009/06/its-about-how-to-pay-not-how-m/

This is an excellent question. My "honest" answer: many top managers do not deserve the "fat" salary they get. Add to it, when these top managers reach their posts, the wisdom "Authority Corrupts" applies to most of them. Look well into many organizations in developing & "sometimes" developed countries and you will see inefficient top managers who reached their positions by devious means. The failure of giant companies & big banks prove my words. 

Top Managers & Management bosses are highly paid .It has been observed in certain cases that they have become pioneer

in setting up the organisation & in course of the development of the organisation by keeping profit making company ,

they become of course the top most boss in such organisation .

For the expansion of such project they need both tech & admn personnel with the require highest qualification & experience

to run the organisation effectively to meet the challenges of other competitive organisation .

In this line higher tech personal they remain in the sub ordinate position & the organisation receive the highest paid the salry

in their comparsion .

Why the top managers & management bosses are highly paid and why they are most authoritative? as compared to the technical team working under them..

In my view, managers are empowered to get works done through people (including technical teams etc) under them as they are responsible for some business outcomes.  Hence, higher responsibility (in the eye of top management) will come with higher pay.

As for why managers are authoritative - in my view, since they are empowered to get works done through other people, they will assess the situation & manage accordingly e.g. if most of the workers are subscribing McClelland's Theory-X i.e. lazy, reactive etc, then managers might need to be more authoritative / micro-manage to get works done & vice-versa.  However, there can be other reasons why a manager behaves authoritatively e.g. due to inexperience, lack of understanding on workers' needs & dynamics, demanding respect from workers that s/he didn't get, or may be s/he get use to authoritative which is his / her default management style etc.  In my view, management styles need to be adopted / changed accordingly depending on factors like business objective(s), workers' dynamics, other resources empowered e.g. tools, processes, power to raise workers' salaries etc., the manager's own attitude & behaviors etc can determine the business outcomes the manager is managing.

Most projects deal with more than one issue, and if issues are complex, each needs a multitasking and multidisciplinary team of experts. Management must see to it that each team has what it needs, and a timetable must be set to secure time accomplishments of by each team according to a general work schedule. Management also must decide on all aspects of team results and recommendations in situations where teams do not see eye to eye on the final, integrated pan. Management, in this example, must make all decisions despite contradictory advice, and must chart the course for the next step. If management makes the decisions, it will also take the flack, and for carrying on their shoulders the weight of decision making, they should be paid accordingly. It is like in an advertisement agency: the "creatives" propose several publicity strategies, and the management must present the best package to the client. If something goes wrong, the client will not go after the "creatives" but after their boss. Expert teams usually do not take the flack because they usually do not make final decisions. The idea is to have a really good decision maker. Otherwise, the end result will be catastrophic and will send everyone out of business. For me, this is evident. I have been in all these positions and the hardest is being the final decision maker. It is a huge responsibility, a do-or-die situation.

Besides, there is a difference between being "authoritarian" based on sheer power, and being "authorized" on the basis of knowledge or experience. Many companies mistake one for the other.  Authorized persons will deal with team efforts better than authoritarian persons. This is plain to see. Power means nothing when the issue is to successfully complete a  project. Good teams need no father figures, but intelligent and well prepared people authorized because of their intimate familiarity with the project to be accomplished.

Lilliana

HI,

You may be interested by this paper:

J Xu, J Yang, "Golden Hellos: Signing bonuses for new top executives", Journal of  Financial Economics, 2016, 122, p 175 -195.

Best regards

Dear Umer,

I think there are objective as well as subjective resons for the management being highly paid.

From the objective viewpoint, management bears the final responsibility for failure and success. This may justify a higher pay check. 

From a more subjective point of view, I would argue that communicative and organisational skills are somewhat higher rewarded that technological proficiency. At least, you need to be a good salesman to achieve sales, but this is not the same as to be a good engineer. As long as success is measured by sales volume, the reward gap may continue to exist or even to grow. Finally, your really need communicative and organisational skills to keep organisations running. Therefore, people who are in posession of such capabilities can move upwards in the organisational hierarchy, where they will be assigned higher responsibilities, which, in turn, leads to higher rewards.

Paul