Analysis of factors that influence executive pay in Brazil

  • Analysis of factors that influence executive pay in Brazil
    Author
    • Joaquim Rubens Fontes Filho

      Joaquim holds a Master's and PhD in Administration from FGV's Brazilian School of Public and Business Administration (EBAPE), a Master's degree in Production Engineering from the Federal University of Rio de Janeiro (COPPE/UFRJ), and an MBA in Accounting from the University of Sao Paulo (USP).

      Professor and Coordinator of the Executive Master's in Business Management at FGV's Brazilian School of Public and Business Administration (EBAPE), and Adjunct Coordinator of the Professional Master's in Public Administration, also at EBAPE.  Visiting professor for the PhD in Administration at Universidad Andina Simon Bolivar, in Quito. He has held advisory positions in several companies and organizations, such as LAMSA, INVEPAR, Belgo-Mineira, Caemi, Sindapp and Instituto Publix, as well as management and technical positions at PREVI and Banco do Brasil.

      He has published several books and articles in the areas of strategy and governance, research development and consulting in these areas with organizations such as Central Bank, Inter-American Bank, Ministries of Finance, Tourism and Planning, Casa da Moeda, Fiocruz, as well as Alagoas, Para and Federal District Governments  Research coordinator research with a productivity scholarship at CNPq, and a researcher FAPERJ.

Summary

The research paper talks about executive compensation, a discussion increasingly common in the political and economic circles of major countries.

The FGV EBAPE study covers corporate governance issues, i.e. how shareholders define their objectives and ensure that they are pursued by hired executives. Executive remuneration, the definition of appropriate values, the value of the fixed portion, the variable portion, the percentage in shares and other benefits - which involve sometimes complex engineering - becomes essential to the objectives set by the shareholders or owners. And incentives work in the various hiring processes, not just for companies.

The highest pay in 2016 in the US was almost $ 100 million, but only 2 million were fixed salary, all the rest in stocks and options. In addition, the average executive pay in the top 500 companies was more than 300 times that of an average worker. This study shows that, in Brazil, the highest remuneration reached R $ 27 million, but with an average close to R $ 2 million, about 40 times that of employees.

This research also evaluates how the compensation structures of executives are elaborated and the positive or negative results they bring. That is, whether the compensation structure creates appropriate incentives. The intention is to be able to contribute to promote better corporate governance practices in companies, but also to understand the importance of incentives, how they are structured, how they work and how they can be used in many other contexts.