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Finance and Accounting, - Literature review Example

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Finance and Accounting,

Controversies such as those linked to the former GE CEO, Jack Welch and the NYSE CEO Richard Grasso have made many companies to create a guideline that will be used to limit how much company executives can earn. It is important to note that even in the cases of the above CEOs, their work and performance on the job was impeccable and many would believe that they earned what they had worked hard for (Jensen and Murphyn 2004:15). However, there is a perception that there was a lot of inadequate disclosure and that they received a little ‘too much’ despite their performance. According to the general conference convened by the International Labor Organization in 1951; the term remuneration was defined as (Yang 2008:654): “the ordinary, basic or minimum salary and any additional benefits that are payable whatsoever directly or indirectly, whether in cash or in kind, by the employer to the worker and arising out of the worker’s employment.” Success on the other hand is mainly defined by the amount of output acquired as a result of one’s ability to utilize the opportunity given to them to lead, supervise, mentor and motivate others effectively. Though many believe that performance is imperative, others postulate that traits and effective practices determine who one becomes and how much they achieve while at the executive position (Yang 2008:654). Others believe that the successful ones are not necessarily the most effective and the debate may go on for a long time. However, the main aim of this report is to look into the issue of remunerations and how they are determined based on performance, success and commitment rather than astuteness to ascend to higher positions quickly. Analyzing Remuneration Packages The past history, if anything to go by, teaches the corporate world that managers, however effective, require having a maximum for the company to remain afloat even when they leave. Attention is mainly given to those who draw so much that the divide between them and the employees widens every other day. People are entitled to get the maximum they can from their hard work. However, placing a cap on how much one can draw is also important for effective running of the company. Many however argue that the lack of proper and adequate disclosure on how much each of these executives earns has placed a barrier between them and other employees (Jensen and Murphyn 2004:13). Many believe that they are receiving record salaries and bonuses. As a result of this, the 1951 convention sought to bring all the remunerations at par within the companies without watering down the motivation of all the employees. For instance, GE’s CEO had planned for some lavish retirement benefits that were kept secret to the board and the shareholders (Fama and French 2001:23). The reputation of one of the world’s greatest entrepreneurs was questioned. This incident led many to believe that this is what all the other CEOs were receiving. The case of the NYSE CEO was no different. He was accused that he was bound to receive a retirement benefit of close to $190 million in 2003 which was also not disclosed to the board (Jensen and Murphyn 2004:15). These cases bring about a lot of questions that the report will try to answer. The issue of disclosure is very vital in any organization based on the sensitivity of the remunerations issue. However hardworking these executives are, the ...Show more

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Finance and Accounting, Literature review For quite some time, the issue of remunerations has been a thorn in the flesh of many companies. Managers have been accused of getting much more than they deserve while the employees are sweating more to help them achieve a fat check at the end of the month (Fama and French 2001:16)…
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Finance and Accounting, Literature Review essay example
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