Introduction
Target Corporation is the second largest department store retailer in the U.S.A. The head office of Target is situated in Minneapolis, Minnesota. This company originated in 1902 under the name of its owner as Goodfellow Dry Goods and was renamed in 1903 as Dayton’s Dry Goods company. It was the first store that opened that targets the several department stores. It began expanding in 1980 on the national level. Target established the highest earning retail store in America. The company diversified in 2004. There are many target retailers’ stores including the city target and super target store. American market accepted it as it emphasized on younger generation needs. Wal-Mart relies on the strategy that provides food at low prices. Target declared a new online order facility for the public, known as Drive Up. Through this facility, people can order products online. People receive their orders at the nearest target place; they come with orders that customers purchased online, and the orders are handed to the customers in their cars.
Executive Base Pay in Target Corporation
The basic pay is generally based on the performance of the employees. When we talk about executive base pay, it is composed of both financial and non-financial rewards by the firm or organization. Executive base pay has a vital role in the corporate governance that is determined by the directors of the company or firm. The base pay for executive pay is generally assumed as an annual payment in the target corporation. Usually, it is similar to salaried staff, but it is paid on a monthly or weekly basis.
Organization or company makes compensation policy for the aim of better performance. Target corporations have adopted a long-term incentive plan. The executive base pay is not related to the level or degree of equity. Executive base pay consisted of salary, bonus, shares of company stock and other benefits. For the last three decades, the dramatic rise produced in executive base pay in the United States in Target Corporation is lower as compared to other developing countries (Salary.com, 2017).
Source: https://www1.salary.com/TARGET-CORP-Executive-Salaries.html
Research studies stated that a rise or fall in executive base pay is natural and the result of competitive business. Target corporation firms identified executive base pay is associated with social goals. The modern corporation pays salary and other short-term incentives, and it is called total cash compensation. Target Corporation made formula driven short-term incentives. For example, the sales directors’ pay depends on its sales performance. Sales performance criteria are also attached to growth turnover. For long-term incentives, the company makes a long-term plan. Target Corporation has stock options-based pay which in the United States is supported by University of Chicago professors. The federal securities laws about executive base pay are clear and straightforward. Target corporation annual report illustrates the statements, rules, and regulations of the company. Registration statements are made by the company to the public. Executive base pay is usually an annual proxy statement. It describes information about stocks and compensation paid to the chief executive officer. There are many chief executive officers in a company that perform different company functions (Bogle, 2005).
“Base executive compensation depends on actual company performance, rather than on the company’s stock price.”
The business world has lately started to focus on the company performance instead of on the company stock price. Company performance is essential for competition in business. Target Corporation pays attention to the performance rather than on the company stock price. Many strategies are used for the assessment of the executive compensation. Target has extended the vesting period for Target Corporation stock. The manager is encouraged by a company that they can have short vesting period as three years and earn long-term expense. In this case, there is potential for a lower decline in stock price, and it sells quickly.
- Confession of pay is an essential step for a company that decides remuneration. The UK first introduced the remuneration report that was an essential step in the regulations of 2002. Many other countries also made a similar report regulation of their companies.
- Pay is based on the performance of the employees in a growing number of countries like in Canada and U.S.A. Meeting is conducted by the company for selling more stock. The USA companies make supervisory board that presents the employees and shareholder meetings (Talent Management, 2015).
Performance-Based Pay Systems in Target Corporation
Executives’ pay most matters, and it is only paid when the target is met. Corporate boards select the right measure for performance. Corporate executives are responsible as a whole for the performance of the company and its stock and some employees often protest that it is not a fair compensation method. The pay that is based on performance covers a comprehensive range of compensation systems. We all know that Target Corporation has large clusters that are considered in two universal groups: the first group considers merit pay plans and the second group that is universally used in some corporations is variable pay plans. Many organizations focus on pay that is based on performance (Reuters, 2017).
Target Corporation Bases Executive Pay
Every corporation sets their aims that they want to achieve. When the aim is achieved, it directly clears the picture of an organization that is growing and achieving targets in the competitive world of business. Target Corporation gives benefits to their employees like bonuses and other incentives for increasing the growth of the corporation. If we analyzed the Target Corporation company compensation for the past five years, we found that the corporation focuses on the store sales growth rather than on stock price. Target Corporation filled yearly bonus and paid that is also known as executive base pay. Executive compensation plans encourage risk-taking and giving the best performances during the financial crisis for the corporation. Every corporation makes laws that help in achieving targets (Talent Management, 2015).
Target Corporation is an equity firm. This corporation delivers a share of ownership of these corporations for the shareholders like those trading in the USA and Canada exchange commission. However, the company is focused on the store sales growth, rather than stock price. An example of the impact of using this strategy is that of the CEO pay package of Brian Cornell who witnessed sharp cut in his compensation in 2017 due to failed financial goals, declined share price and sales. The compensation of Cornell, i.e. the CEO of target is based on two financial performance metrics. Firstly, on the incentive EBIT that makes up about 75% of the stock component of pay and the rest is based on the adjusted sales (Reuters, 2017).
The Hierarchy of Performance Measurement
Source: https://hbr.org/1999/03/new-thinking-on-how-to-link-executive-pay-with-performance
Challenges
At the start of the 21st-century business world focuses on growth rather than stock price, but it still produces income inequality as raised by the Target Corporation. Changed focus on executive base pay and corporation knew that change effects on the business world and society. Most of that consideration has been undesirable, with rising current worries and criticisms about extreme executive pay. In these consequences, attention diverts toward the executive pay.
The CEO appraises the performance of all employees, and how well they perform their duties in the corporation. Incentives are given on the basis of the performance of company stock. There is a big challenge for the individual because the single individual has not controlled the company stock price. On the corporate level, performance depends on every single employee who is working in the corporation. The research stated that company performance only describes the 4% modification and adjustment in executive compensation. In the corporation, incentives only work well when an individual can see a straight link among their strength, struggle and the payoff for achieving targets.
Target corporation success depends on all employees’ performance. When the CEO takes action there is no payoff. When compensation can be linked to company monetary performance it is predictable as a massive focus for directors and managers is then diverted on the company performance making them exposed and forcing them to do whatever is required for better performance.
The executive pay of the employees on entry level per year is $45415. The skills of the employee that are associated with the job are agreement negotiation, business development skills and strategies for sales. In the United States sales executive earns $60000. It is the average salary for the sales executive in the world. The salary is estimated on the base of data analysis of 15259 salespeople and as by the research conducted in Glassdoor by sales staff. The executive reward is a stimulating problem that has no proper and straightforward explanations. Every executive officer has different pay according to his performance. Every executive officer has different pay packages that attract the employees, but the pay is directly linked with performance. Target corporations have a real impact on business and society, and their performance-oriented compensation plan can change the social perception and earn considerable profit
Conclusion
In the end, it is concluded that for Target Co. The executive base pay is variable, plays a vital role in corporate governance and is determined by the directors of the Target Corporation. The base pay for executive pay is typically assumed as an annual payment. When compensation can be linked to company monetary performance it is predictable as a massive focus for directors and managers is then diverted on the company performance making them exposed and forcing them to do whatever is required for better performance.
Target has focused on the store sales growth, rather than on the stock price. It is important to base compensation on the right financial performance metrics of the executive in order to not only gear the performance but also to compensate equally as well. Furthermore, compensation based on stock prices leads executives to look for shortcuts and manipulative strategies to raise the stock price and can be harmful to the actual company performance. Enron is one example to show this. Hence, the approach that Target has adopted is well received and should be adopted by other companies as well.
References
Bogle, J. C. (2005). The Executive Compensation System is Broken. Journal of Corporation Law, 30(4), 761-765.
Butler, H. N. (1988). Corporation Specific Anti-Takeover Statutes and the market for corporate charters. New York.
Reuters. (2017, May 1). Target slashes CEO pay package after bleak year. Retrieved from https://www.reuters.com/article/us-target-compensation/target-slashes-ceo-pay-package-after-bleak-year-idUSKBN17X1RV
Salary.com. (2017, February). Target Corp: Compensation by Company. Retrieved from Target Corporation: https://www1.salary.com/TARGET-CORP-Executive-Salaries.html
Talent Management. (2015). Talent Management 360. Retrieved from The Challenge Of Executive Compensation And Why It Matters: https://talentmanagement360.com/the-challenge-of-executive-compensation-and-why-it-matters/
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