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Management Earnings

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As you can see, management is a challenging and often rewarding experience, despite frequent, long hours. It offers opportunities to use your knowledge in shaping the direction of a company, a product, and the careers of other workers.

Management can also be rewarding on the financial side. One often reads about seven-figure salaries earned by superstar athletes, newscasters, and television personalities. Overlooked is the fact that an athlete's career is short-lived, often ending by the time the player is thirty-five or forty years old.

Professional managers, on the other hand, have a sustained earning power that often lasts for several decades, and they are usually assured of substantial retirement incomes for the rest of their lives. Some executives even stay on as consultants and members of the board of directors.



EARNINGS OF MANAGERS

Managers generally earn more than non-managers. In fact, top level executives are among the highest paid workers in the country. They are highly paid because their leadership skills directly affect company growth, economic survival, and internal vitality. Managers make decisions, develop resources, set policies, take risks, and motivate their associates, who may include financial backers.

Salaries almost across the board dipped in 1994, but 1995 and 1996 figures and preliminary 1997 data indicate that they are on a strong rise. Even in 1994, however, superstar managers accounted for the largest portion of the top 1 percent of all wage earners.

Management earnings vary with company size. In fact, company size is the single largest factor affecting compensation, with an executive in a large company earning as much as ten times the salary of an executive in a small firm.

Salaries also vary from industry to industry. For example, restaurant, cafeteria, and bar managers average $28,600 per year; financial managers, $39,700; and hotel managers, $30,000 to $57,000. A recent salary survey published by the accounting firm Coopers & Lybrand, LLP, indicated that the average annual starting salary offered to college seniors ranged from $25,955 for market research analysts to $28,186 for accountants, $28,987 for positions in finance, and $34,000 for computer systems analysts. Of course, these numbers vary greatly by specific job function, locale, and corporate environment.

Salary levels vary substantially based on length of service, level of responsibility, and location of the firm. The estimated median salary of general managers and executives was $38,700 in 1988. By 1994 general managers of firms with more than 500 employees were averaging $70,000 to $108,000 per year. Many earned well over $150,000. A recent survey of top corporations revealed that more than 150 chief executive officers received base salaries in excess of one million dollars. With additional compensation, such as pension, stock options, and so forth, total earnings could be much higher.

FRINGE BENEFITS

Success in management may be measured by title or status and by material rewards such as salary, bonuses, and stock options. It may include special privileges such as vocations, or use of company vehicles or other facilities. Such fringe benefits are sometimes called "perks."

Differences in fringe benefits among companies depend on the size of the company, location, type of business, whether the business is unionized, and the philosophy of its management. Programs may include the following:

Bonuses, coffee-breaks, disability payments, group insurance, life insurance, maternity leave, military leave, paid holidays, pensions, professional association dues, profit sharing, sabbatical leaves, savings plans, medical leave, stock options, tuition-assisted education, union service and leave vacations.

A few companies are innovative about their benefit programs and try new approaches. For example, one company promotes the "cultural environment" of its employees and discusses employee self-renewal opportunities that will improve minds and attitudes. Although its benefits plan includes most of the items listed above, focus is on the following provisions:
  1. A promotion system that gives full-time employees first chance before outside recruitments are considered

  2. An extensive educational program with more than 400 courses held in the company educational center

  3. A profit-sharing plan for full-time employees

  4. Three health-care plans to choose from

  5. Psychological and family counseling

  6. Educational leaves

  7. Graduated retirement plans
Today's high-level managers can expect sign-on bonuses when they join new firms, along with a generous pension plan. Many managers in financial services and sales will receive regular cash bonuses and profit-sharing plans. However, only 3 percent of managerial employees received stock options.

Employee Investment Plans

The board of directors and stockholders of a company may authorize that shares of a company's common stock be made available to salaried employees as part of a company-sponsored employee savings plan. Employees may invest deductions directly from their pay, and the company may match up to 50 percent of the investments. This matching is usually restricted to 4 to 8 percent of an employee's total pay, and company contributions are invested only in company shares. Employees usually pay less than the market price for the stock.

Financial Award Plans

Another benefit plan is a special long-term incentive program for officers and key executives only. This program reflects a growing practice in many industries to recognize and reward key executives who have major responsibilities for determining future performance and growth of the organization, often in a highly competitive international setting. These plans try to reward executives commensurate with their achievements in meeting major financial and service objectives. Awards may be in cash or stocks. Cash awards are payable in a lump sum or annual installments over a period not exceeding five years. Executives may defer payments to later years, to be paid with interest.

One year, one of the country's large corporations aggregated nearly $3 million for distribution to its key executives. Usually each executive is eligible for an award only periodically-perhaps once in five years. A committee composed of outside directors in cooperation with outside consultants selects award recipients.

It is maintained that such plans motivate executive performance and help a company retain a high-quality management team capable of leading the firm in a growing, complex, and volatile economic environment. The following sampling shows the possible size of executive cash awards in large corporations and how such awards affect the salaries of highly paid officials.

Base Salary + Cash Award = Total

$375,000     +    $325,000    =    $700,000
$240,000     +    $260,000    =    $500,000

In addition to cash awards, key executives may receive hundreds of shares of company stock for outstanding performance. Annual reports show that top executives often own, personally or in family trusts, from 100 to 50,000 shares. A not-to-be-over-looked benefit for them is that they may also consult company tax lawyers and specialists when preparing federal and state income tax reports and planning financial matters.

One factor that has recently influenced management benefit packages was a proposed law that would have penalized companies that offered dramatically different levels of benefits to their management and regular employees. Although the proposed law was defeated, it did prompt many corporations to equalize benefits offered to managers and other employees. Managers are still much more likely to receive certain special benefits-such as stock options and bonuses-than are regular employees. But in the areas of vacation, health programs, and other, more common benefits, the differences in benefit packages are seldom significant today.

Retirement Plan

In most American corporations, an employee who retires at sixty-two or older with one or more years of service (or at sixty with fifteen or more years of service) will receive a monthly income for life in addition to Social Security. Examples of how these incomes are computed follow:
  • $18 times the number of years of service: $18 x 10 years = $180 monthly

  • With percent of compensation for every year of service: 1.5 (.015) x $800 (average wage) x 12 years (years of service) = $144.00

  • A pension benefit calculated by subtracting one-twelfth of 50 percent of the estimated Social Security benefit
There are many such formulas, some determined by the executive committee or negotiated with a union. Early retirement at a reduced retirement income is becoming popular because of fast technological changes and job obsolescence; employee burnout from stressful jobs, complex decision making, and psychological fatigue; and the need to trim "fat" from organizations. Many firms are encouraging employees to retire after age fifty-five with fifteen years of service or at any age with thirty years of service.

EMPLOYMENT SECURITY

Managers not only earn more on average than most workers, they are also less likely to be unemployed than the average U.S. worker. True, middle management took a serious hit in the late 1980s and the early 1990s as a result of the "Black Monday" stock crash and the globalization of most industries. However, the Bureau of Labor Statistics projects that outright unemployment among all categories of managers will be low or very low throughout the next decade. Although current trends toward reducing management overhead may affect these figures slightly, a manager is more likely than is the average employee to have a secure job.

Of course, managers continue to be fired or laid off in corporate restructuring. However, a manager is more likely than is the average worker to receive another job offer or assistance in finding new employment. Management placement and outsourcing firms have sprung up across the country. The placement firms often serve a dual function. First, for many managers seeking reemployment, they provide office services such as computers, fax machines, e-mail, and telephone banks, for a nominal fee. Secondly, they also act as "headhunters," i.e., job placement centers. Management outsourcing, a relatively new field, provides a steady pool of management consultants for many companies. A small percentage of talented business administrators prefer to work this way. Though the benefits might not be very good, the higher salaries based on hourly or per-diem consulting fees rather than an annual salary basis are often higher than in the full-time employment arrangement. Likewise, executives nearing age sixty or older are often offered early retirement packages with incentives as a way to reduce management ranks. Thus, executives are less likely than the average worker to be left in dire financial straits from a layoff.

HOW FAR IS UP?

After reading this information about fringe benefits, the young reader may feel like a mountain climber standing at the base of a pinnacle yet to be scaled. How far up can he or she get?

Obviously the top benefits described in this chapter are achieved by only a few who carry the burden of keeping the organization profitable and competitive. They are the captains of the ships of industry, and their decision-making responsibilities in the world's complex economy are terrific. Only a few have the ability to function at the top tiers of leadership.

Be reminded, if you are not so inclined or qualified, that there are thousands of leadership roles between line supervision and top management where you can make satisfying contributions. There are plenty of management opportunities for everyone because wherever people work together, leaders are needed. If you enjoy leading, prepare for the role. If you prepare conscientiously, you will surely achieve some measure of success in a field that pleases you. A seventy-nine-year-old former executive officer of a large oil company was asked, "As a man acutely aware of what it takes to be successful, what advice would you offer?" He answered:

"Well, I'd say the most important point is to never, never lose your enthusiasm. No matter what you do, do it with enthusiasm. I enjoy my work. It's exhilarating. I also think I have a receptive mind and a good memory. I listen to people, and from listening I get a lot of ideas. I learn of opportunities that perhaps other people would miss.... it's a combination of many things. I've always been a great optimist, although I try to temper it with a certain amount of conservatism and realism. But if you approach everything in a negative fashion, you'll never get anywhere.

"All in all, I would say that people should try to do a better job than anyone else has done before and to do it with zest. I suppose my ambition in life is to leave the world a little better than when I found it."
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