Principal-agent model - This model assumes executives work to produce value for the firm in exchange for tangible and intangible benefits including financial compensation. Although many aspects of the principal-agent relationship are reflected in employment contracts, monitoring agents is limited to obser... ... middle of paper ... ...escalation and shareholder criticism, the compensation committees dilemma is whether to pay higher wages for top talent that could potentially increase company value or pay less for inferior talent that might reduce it. d. Tournament models - This approach assumes that executives are drive by the job level, pay, and promotion opportunities as they compete across the corporate hierarchy for open positions. As executives move up in the organization, there are fewer and fewer chances for promotion. "At the highest rung of the corporate ladder, the probability of promotion to CEO is so small that a very high relative rate of pay is required to maintain an adequate incentive effect for senior executives operating just below [the] CEO level" (p. 25).
Research shows the agency theory has been the primary foundation for research in the relationship between firm performance and executive compensation. The agency theory holds executive officers of a firm tend to act in their own self-interest in conflict with the interests of the owners who seek to maximize the value of their investment. The hypotheses type that I like we’re will data was collected from varies industries using the ownership structure and instructional
According to these theories, although the basic premise is that the management’s role is to assemble the factors of production, people and for the economic benefit of the organization, beyond this point these two theories takes diversion. Figure 1: Theory X & Theory Y (Image Source: Net MBA) When the Theory Y is focused the organization can do wonders to the employee motivational energy by, • Decentralization and delegation • Job enlargement • Participative management • Performance appraisals Therefore, without doubt we can say when properly implemented, this would result in a high level of motivation as employees work to satisfy their higher level of personal needs through their jobs. ADAIR: John Adair leadership is an Action Centred Leadership. Figure 2: The Three Core Management R... ... middle of paper ... ...iew. Available at: http://hbr.org/2000/03/leadership-that-gets-results/ar/1 [Accessed 26 May.
The main objective of this study is to Identify and analyze the relationship between executive compensation and the sustainable future of the respective organizations as a result of granting these compensations. This is considered in a broader scale where not only the company but also the employees and the stakeholders of the company are considered. Before proceeding into details it is worthy to understand what an Executive compensation is. Executive compensation or executive pay is composed of the financial compensation and other non-financial awards received by an executive from their firm for their service to the organization. Examples are salary, short-term incentives, long-term incentive plans, employee benefits, paid expenses and insurance.
For Sunan Pty Ltd to have a successful float, a detailed and well thought out compensation governance needs to be developed. The following recommendations have been built create a compensation package to help maximise shareholder interest for Sunan Pty Ltd. PRINCIPLES OF REMUNERATION Remuneration packages should be created to attract executives capable of motivating people, communicating a vision, and leading a company to success to achieving long-term shareholder value ***** Remuneration packages should reward success over short and long term periods with an emphasis on the long term ***** Remuneration packages should be fair to all stakeholders of the business REMUNERATION COMMITTEE The determination of executive’s compensation packages should be handled by a committee composed of fully independent directors. Remuneration committee members should have ability to exercise independent judgement while being able to balance the long term shareholder interests with the need to attract, motivate and retain executives. To make sure there is a good balance the committee must consider the committee members and how the committee works. Selecting Committee members In selecting the committee members, Sunan Pty Ltd should consider the following: • Diversity of professional backgrounds and if possible include members who specialise in executive compensation.
Customer Profitability Analysis assign sales, general and administrative costs and resources to the customers groups, that helps in making more profitable budget allocation decisions and to simulate the impact of decisions, such as price adjustments and resource allocation decisions, on the potential profit contribution of their customer base, thereby strengthening the decision-making process and enables long term organisational profitability by maintaining customer relationship and satisfaction (Gupta and King, 1997). Apart from helping better decision making, customer profitability analysis also helps in motivating managers and employees by providing volume of relevant information. Organizations that may not benefit from Customer Profitability Analysis include those whose costs to serve are small and pre-sale and post-sale services are not important in gaining a competitive advantage. This would be the case in organizations whose customers are relatively homogeneous or indistinguishable. In such rare cases, customer gross margin may be sufficient to obtain Customer Profitability Analysis benefits (Cooper and Kaplan,
Through this research it can concluded that company culture not only affects and defines the company and the employees but marketing strategy as well. Furthermore, it would be beneficial to marketers and company executives alike for additional research to be conducted about how marketing can drive company culture and vice versa. However the empirical evidence of the numerous companies that already demonstrate excellent corporate culture and strategic marketing.
In today’s competitive landscape, organizations must utilize every resource to its fullest in order to achieve profitability. Peter F. Drucker, who is known as “the founding father of the discipline of management”, informs us that employees are assets, which should be treated as a company’s most valuable resource. The key players involved in utilizing this valuable resource are the managers of a company. Managers have a vital role in a company and the effort they put forth into their tasks and responsibilities will directly affect the success of a company. In Drucker’s book Management: Tasks, Responsibilities, Practices (Revised Edition), he explains the role of a company’s management team and the secrets to becoming a great manager.
After implementing a program, a company should ensure that it remains competitive and consistent. Types of Compensation Programs Compensation programs can either be job-based or person-focused. Person-focused pay is driven by potential, while job-based pay is driven by results. Within these two categories, many different types of compensation plans exist, each of which has both positive and negative aspects. Job Based Job-based pay systems award raises and bonuses based on how well employees perform their jobs.
So the main goal of the performance-pay system is to pay according to concrete results presented by executives; tying stock option and other incentives to performance was a way to build loyalty to the shareholders... ... middle of paper ... ...elate well with performance. The managerial theory is important because it alludes to a problem with corporate governance, which is design to protect the interests of the owners of a corporation and ensure sound corporate decision-making but in essence it embellish the ambitions of the executives. Here are a few factors that create managerial power imbalance, the process of election of board members, the diversity (level of knowledge) of board members, and the fact that board members often have inadequate bargaining power to challenge managerial decisions and the lack of ability to measure performance. It also creates inefficiencies resulting in excessive compensation that doesn't relate to performance. Due to the public outcry for corporate transparency; managerial power theory goes step further and incorporate new steps to insure the transparency of all companies