Requirements: two paragraphs

Answer preview

Based on the information they have collected; the board chooses the compensation structure or base income that is below or above the average rate for executives at the same level. Also, the board also provides an annual bonus to the executives, which is mainly intended to motivate them to perform better. It is mostly tied to the firm’s annual target (Martocchio, 2004). The executive pay is justified because the board prefers hiring experienced, educated, and successful executives. To get such an executive, the board must be willing to pay higher salaries. The compensation commensurate with the skills and experience that the CEO possesses. The company’s board budget a lot of money to invest in a talented CEO who would intern help the shareholders generate more profits.

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