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The Debate on Executive Compensation - Essay Example
Finance & Accounting
Pages 9 (2259 words)
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…
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. ...
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