Executive Compensation Paper
Executive Compensation
Executive Compensation
When we think of compensation, the first thing that comes to mind for most people is in the form of their income such as wages earned, or cash. However, compensation can come in many forms. Employers provide compensation to inspire and motivate employees’ performance to accomplish the organizations goals and objectives. Executive compensation is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentives such as stock awards and options (Hitt, Ireland, & Hoskisson, 2011). In this paper the author will discuss issues of executive compensation and what the future might be for these employees.
What are some of the …show more content…
Some people believe that CEO’s are rewarded in the short term as opposed to long term performance which further leads to a governance issue that boards of directors need to ensure that executive compensation is focused around shareholders’ long term interests. Compensation for a senior executive comprises of a basic salary, a short-term bonus, a long-term bonus, and an additional retirement fund, and their salary is usually a quarter to a third of total compensation (Cote, 2007). Cote used a comparison of the top CEO’s salary being 400 times that of the average worker. It is the author’s opinion that the laborers of the corporation should receive a huge chunk of what would typically be the CEO’s salary and put some balance back into this equation of fair. Typically, you must analyze the market and what the market price is for a CEO in relation to …show more content…
However, the change ahead of us needs to incorporate how the manager will make the optimal amount of effort, and optimal level of risk. Continuation of employment matters to manager’s therefore high fixed compensation can induce effort along with countering the incentive for excessive risk. The Dodd-Frank Act implements a number of significant regulations regarding executive compensation. This act was created by President Obama in 2010 and was implemented after the global credit crisis relating primarily to financial institutions but including a number of significant executive compensation rules which attempt to address wide spread public outrage of executive pay (Sepe, 2011). The issue of executive pay is already in the spotlight and is gaining attention as time passes; it seems inevitable that more government regulation concerning these issues is
Executive Compensation
When we think of compensation, the first thing that comes to mind for most people is in the form of their income such as wages earned, or cash. However, compensation can come in many forms. Employers provide compensation to inspire and motivate employees’ performance to accomplish the organizations goals and objectives. Executive compensation is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentives such as stock awards and options (Hitt, Ireland, & Hoskisson, 2011). In this paper the author will discuss issues of executive compensation and what the future might be for these employees.
What are some of the …show more content…
Some people believe that CEO’s are rewarded in the short term as opposed to long term performance which further leads to a governance issue that boards of directors need to ensure that executive compensation is focused around shareholders’ long term interests. Compensation for a senior executive comprises of a basic salary, a short-term bonus, a long-term bonus, and an additional retirement fund, and their salary is usually a quarter to a third of total compensation (Cote, 2007). Cote used a comparison of the top CEO’s salary being 400 times that of the average worker. It is the author’s opinion that the laborers of the corporation should receive a huge chunk of what would typically be the CEO’s salary and put some balance back into this equation of fair. Typically, you must analyze the market and what the market price is for a CEO in relation to …show more content…
However, the change ahead of us needs to incorporate how the manager will make the optimal amount of effort, and optimal level of risk. Continuation of employment matters to manager’s therefore high fixed compensation can induce effort along with countering the incentive for excessive risk. The Dodd-Frank Act implements a number of significant regulations regarding executive compensation. This act was created by President Obama in 2010 and was implemented after the global credit crisis relating primarily to financial institutions but including a number of significant executive compensation rules which attempt to address wide spread public outrage of executive pay (Sepe, 2011). The issue of executive pay is already in the spotlight and is gaining attention as time passes; it seems inevitable that more government regulation concerning these issues is