One of the most interesting decision the company must make is whether to give its CEO a golden parachute, and what the company decides to offer as a compensation package, can be one of the most important decision the board of a company makes. Compensation packages are one of the biggest reasons a CEO would choose one job over a different job. Most CEOs, and people in general, want to make the most possible money from their job, so they will choose the job that allows for that. This means that for a company to get the best CEO, which in theory would mean the company would be the most profitable, the company needs to have the best compensation package. However, having a compensation package that is too high is also not good because it wastes money and may have negative effects on the company.
Corporate Governance Corporate Governance is the relationship between the shareholders, directors, and management of a company, as defined by the corporate character, bylaws, formal policies and rule laws. The corporate governance system was designed to help oversee the decisions and best interest of the shareholders. The system should works accordingly: The shareholders elect directors, who in turn hire management to make the daily executive decisions on the owner’s behalf. The company’s board of director’s position is to oversee management and ensure that the shareholders interest is being served. Corporate governance focus is with promoting enterprise, to improve efficiency, and to address disputes of interest which can force upon burdens on the business.
The Board of Directors is the highest governing authority in a professional management structure. It is made up of two tiers of individual members who are elected by the shareholders of the corporation to establish corporate management related policies. These two tiers include individuals chosen from within the company such as manager, CEO or other daily worker of the company. The next tier involves chosen individuals that are outside of the company and considered to be independent. These individuals are also elected to make decisions on behalf of the corporations, more importantly public companies must have a Board of Directors in place.
The board hires and fires the CEO who can hire and manage the executives and employees. The executive managers are also allowed to hire and manage employees and to look out for their actions. Looking at the chart, I would say that there is a gap between shareholder, board of directors and workers, which can bring the profit down. So that we can say that, the CEO is the main figure who has to stay between the board and employees and take care of the good image and cash flow of the organization. In one of his publications, Chris MacDonald, an educator, speaker, and consultant in the realm o... ... middle of paper ... ...e traditional governance responsibilities, finance and strategies of an organization.
Furthermore, we assume that the design of a compensation package and the choice of performance measures have an effect on the executive motivation to behave in a certain way. Thus, the agency theory serves as a basic concept of this paper. Structure of executive compensation. The introductory part of this paper focuses primarily on the theoretical background of executive compensation, the role of motivation and corporate governance approach. The next part is dedicated to the different components of executive compensation package and how it can affect management’s choices.
The evaluator or middle manager thus can influence a corporate strategy also negatively, by favouring his own subunit, rather than the firm. This is probably overlooked by Ren & Guo, but r... ... middle of paper ... ...e - or Destroy - Your Company ’ s Strategy. Harvard Business Review, 85(2), pp.72–79. Hornsby, J.S. et al., 2009.
Excessive Business Risk Taking and Lack of Risk Control To taking higher business risk, investors are expected higher rewards to compensate. Sometimes the director of companies might take decision planned. Profits and dividends should be expected to go up if company makes decision that increases the scale of the risk it faces. Ethical Issues and Corporate Governance Corporate governance only can provide a system or guidelines that is seen to be ethical, true and fair to shareholders. Important company to be aware of the need to maintain a culture of good corporate ethics and the perception of ethical issues by external pressure groups can affect the reputation of the company.
Depending on the size of the company, the CFO will have varied scope of responsibilities and range of departments which he supervises to make sure that he will be able to give a transparent, precise and truthful report of the company’s financial status. Strategic planning is a process wherein the company will allocate its resources and focus its priority in creating a strategy that will meet the company’s set goals according to its mission and vision or its future plans of evolving or expanding. This might involve change in processes or plans to make the operations of the company more efficient or improve the overall status of the company. The main focus is to make sure that everyone in the company and its stakeholders are focused towards common goals and there are a set of realistic and feasible results or expectations that could lead the company to being a better one. That way, once the strategic plan has been set and implemented, the success of it can be easily evaluated.
According to Friedman, a corporate executive 's responsibility to his owners includes carrying out business operations that fulfil the owners ' or shareholders ' desires of maximizing profits in accordance with the legal and ethical rules followed by society. Apart from maximizing shareholder value, a corporation must provide shareholders the right to vote in the organization and the liberty to buy and sell shares as they
The jobs of CIO and CEO are different, so there is the chance having the clashes in perspectives. As a CIO, making the health and state of the information is crucial; the effective and strategic use of common enterprise-wide information requires someone with a cross-functional perspective. And as a CEO, information system is there to support business decisions, because the CEO needs to use the information to support its management and the leadership. When there is a conflict between CIO and CEO make decisions, they need to think of their perspectives.... ... middle of paper ... ...d documenting meeting sessions. People components include participants, a trained facilitator, and staff to support the hardware and software (Landon & Landon, p369).