Instead of the inverse proportionality of their pay to the performance of the firm, it should be such that the relationship is directly proportional to each other. Usually, the executive pay is a combination of the salary, extra bonuses, reimbursements, and shares on the company stocks. The compensation is given a stringent configuration to comply with the necessary legal requirement, which includes tax law, regulations of the government, the desires of the company as stipulated by the executives and the organization itself, and of course the reward and performance. Most important is the fact that the executive pay is always a subject of approval from the board of directors and meanings that the salary is predetermined before the actual performance of the executives is noticed (Bertrand and Mullainathan 2001, p.62). Different schools of thoughts have thus arisen over the executive pay by hypothesising on the motivating factor for the increasingly rising pay for the CEOs and two schools of thoughts have been brought forth. ...Show more
The Debate on Executive Compensation The debate over companies’ executive compensation in the recent past has been run in the highest possible tone. This is following the incommensurate pay they receive in the company’s overall performance. The executives’ pay has been discussed for a long time with the recent financial crunch just rekindling the debate…
Remuneration occupies an important place in life of an employee. His or her standard of living, status in the society, motivation, loyalty and productivity depends upon the remuneration he or she receives. For the employer too employee remuneration is significant because of its contribution to the cost of production.
This financial crisis, the biggest since the great depression of the 30s we are told, started early 2008 and several large organizations with big names like Bears Steins, Lehman Brothers, and AIG have collapsed. This has led to an unprecedented bail-out to companies by governments, which under normal circumstances are not eligible for such.
It appears as though these executive pay issues are often at the forefront of the news when executives are involved in some type of litigation that result in compensation related issues; or simply a news flash about exorbitant executive compensation. The topic of executive pay has received significant attention in recent days as evidenced by an explosion of interdisciplinary literature ranging from law to accounting to organizational behavior and strategy.
Today, with the increasing researchers desires to demonstrate the importance of an effective human resource policy on organisation performance research has shifted from a micro level that previously dominated research interest to a more general, strategic macro level3.
A company's audited financial statements and the corresponding supporting disclosures provide a firm-specific information set which is made available to investors and regulators. When this information is not properly disclosed, this will lead to future problems on the part of the company owners.
With regards to this above mentioned information, this paper basically discusses whether or not an executive compensation scheme or also known as ECS are inherently flawed and also the disclosure requirements of the executive compensation scheme or ECS. The traditional and the particular view of ECS is only to attract to motivate and also to retain all the qualified personnel.
In 2000, it was 531 times. These facts were made the basis of a question whether or not the CEOs of the United States of America are overpaid.
The salaries and other benefits received by CEOs depend upon a number of factors. These include the size of the
Obama was, for instance, seriously threatened when he was linked to Franklin Raines, the former Fannie Mae CEO , who was reportedly compensated $90 million from 1998 to 2003. Understandably, this is an important issue in America amidst the ongoing financial recession wherein
Managers may use this power to serve their interests There are two ways of linking executive competition and agency problem, which include the optimal contracting approach and the managerial power approach.
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