Section of a report from Peter F. Drucker to Marty Davidson regarding compensation for home office executives. Drucker specifies that compensation needs to be structured to encourage executive teams as well as willingness to grow with the business and innovate. He proceeds to declare that there should be no more than a 20% differential between the company's top executive and that of the people that report to him/her and work most closely with him/her, and no more of a 25% differential between this group and the next tier. Within this arrangement, team performance, rather than individual performance, should be the consideration. Finally, Drucker recommends that the top management team of a company have balance in age structure, that they should have participation in company profits, and that this participation should be based on five years' rolling figures.
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