{ "media_type": "text", "post_content": "Stupid hypothetical question...How do industry execs get paid? If I had a $3MM operating budget for T&M and only 5 direct reports making $100K, does that mean I can allocate $2.5MM to my own salary?", "post_id": "5c34ac10ae55c4001381349d", "reply_count": 30, "vote_count": 12, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting" }

Stupid hypothetical question...How do industry execs get paid? If I had a $3MM operating budget for T&M and only 5 direct reports making $100K, does that mean I can allocate $2.5MM to my own salary?

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Unpopular opinion: I see a bunch of people laughing and pointing fingers and no one stepping up to demonstrate they actually know better. My completely inexpert understanding: Exec pay is a lot like our pay, except with more widgets that act as multipliers and more zeroes at the end. To take your operating budget example, I’d imagine that the exec gets a bonus to his/her salary based on margins for the division managed as well as the company overall. So the exec has an incentive to keep expenses to a minimum while maximizing whatever it is that group outputs. So it is very indirect but it would be there. I invite others to correct me, as this is well above my pay grade and thus I don’t really need to know much about it

likehelpful

Nope. Funds allocated are planned $s for you to spend on actual work. Usually, this money is allocated based on a budget and plan you submitted the prior year. The company’s overall operating expense will be lower if you didn’t spend the money. Consequences: when planning for the next fiscal year, it will be recognized that you didn’t spend all your $s, so you’ll be assigned a lower budget. In addition, it will be recognized that your prior plan was inaccurate, and your planning skills will be questioned. Not a good look at all

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If you took a shot at OP without answering the question, you aren’t really staying in the spirit of this site. Telling people they’re idiots and not really telling them how to solve the problem is why a lot of people in the industries you serve don’t think very highly of us collectively... Well done. To answer your question, OP, execs get paid a combination of salary, bonuses, and stock compensation based on the performance of the executives’ unit (or the company overall). Those comp packages are typically approved by a board of directors, not by the CEO himself. Maybe that doesn’t apply in start up or GPs, I don’t really know. Stock comp is preferred by many publicly traded companies because it mainly impacts equity, not as much the P&L. You can read up on ASC 820 and ASC 718 to understand the impacts of stock comp on a company’s financials. In short, that $2.5mm payday for the exec might never come out of an operating budget as you expressed. Maybe I’m not following your question all the way correctly though. Feel free to follow up, if anything I stated isn’t clear

likehelpfuluplifting
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In fairness OP did say it was a stupid question

likefunny

It means you have $2.5mm to hire EY consultants. Drop a burner i can send you a proposal.

likefunnysmart

Yeah industry execs don’t pick their salary usually ....I guess unless your last name is Trump and you funnel funds illegally to your children

likeupliftingfunny

Damn that escalated quickly!

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Nobody picks their own salary

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Why is everyone coming down so hard on OP? And no one really answered the question while at it......

likehelpful

Lol this is embarrassing, what part of accenture do you work for OP?

likefunny

Lol I said it was a stupid question

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Feels good to be right doesn’t it?!

likefunny

Not sure what’s more stupid here; the question itself or the incorrect use of the word “hypothetical.”

likefunny

D1's right, base tends to be XXXk /yr with certain "targets", and hitting these targets get an additional 0.5x to 3x (and maybe higher but doubtful). Profit still gets funneled into potential acquisitions and paying off debt, etc.

likehelpful

Op please turn in your consulting card to the nearest Accenture office

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If this was jeopardy, the answer would be “what is - the reason OP is not an industry exec”

likefunny

Screenshot for the competition slide in my next RFP response.

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OP asked a yes or no question.. If you own the company, the answer is yes you can pay yourself whatever you want - In all other cases no

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Lol ya this is bad haha. We are talking basics tight now

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Yes. That’s exactly how it works

funny

OP what do you do at Accenture - genuinely curious

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He works in HR, in charge of setting new salary bandings

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Execs are often time on a contract as well. They get paid regardless if they get fired, but also renew their contracts after a successfully completed time period

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Fun reading through all the comments. Feel for ya Op. Simple ans to your question is No. budget is forecasted spend which the exec is allocated for his team and if he asked for 3M and just manages to utilize 0.5M, he probably didn’t estimate and project his needs right or some program which were anticipated to start, didnt go through. So all said and done, the exec returns the 2.5M back to the corporate pool and again will need to provide budget for next year when the time comes.

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