Importance of Stakeholders for Balanced Executive Compensation and Shareholder Value Maximization

Designing of executive compensation is undergoing significant changes in contemporary business conditions. Stakeholders directly influence, with varying but strong intensity, the design and administration of compensation models. Each group of stakeholders has different, sometimes conflicting, goals. In order to achieve the right balance of interests, in terms of rewarding the highest managerial levels, shareholders, the Board of Directors, other stakeholders and managers need to clearly define goals. The paper analyzes the importance of stakeholders in the process of designing balanced executive compensations, which leads to an increase in shareholder value. The aim of this paper is to explain the importance of balancing the different stakeholders’ interests in the process of designing executive compensations, in order to achieve shareholder value maximization.