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Debate over executive compensation
Trends in executive compensation in the public sector
Relationship between Executive Compensation and Enterprise
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The McGraw-Hill Irwin, “AFLAC and CEO Dan Amos,” video, is quite an informative one as it relates to the AFLAC company and it top level manager. It deals with the way in which Chief Executive Officer Amos, runs the day-to-day business of AFLAC. It speaks on how Mr. Amos, who is a top level manager is a risk taker. Mr. Amos is now taking a big risk in allowing the stockholders of AFLAC to vote on his compensation packet. Not only will the decision that is made by the stockholders affect his professional life, but it will have an impact on his personal life as well. However, many Chief Executive Officers in one day earn more than an average employee earns in one year. In the video is also described how executive pay critics complain about the pay of Chief Executives Officers when a company is not doing well. What principles from this week’s readings tie into the video? The principles from this week’s reading that I believe tie into the video …show more content…
Not only that but, believe that it is so awesome what Chief Executive Officer Amos, is allowing stockholders to vote on the pay package can include salary, bonus, stock options, and deferred compensation. There are not many top level managers that would put their livelihood in the hand of others. To me this speaks volumes about his leadership. The practicality of this type of practice across other corporate environments I believe will receive strong support for their stockholder’s advisory board to vote on the company’s executive pay policies and practices. The only adverse factor that I see is that there may be tension between paying managers what they are truly worth and in a manner that motivates them to disburse their utmost to create shareholder value and not paying managers more than they are truly worth or in a way that distorts their
The reason that I chose to do this article is because in class I found the discussion of CEO’s
Bolton, P., Mehran, H. and Shapiro, J. (2010): "Executive Compensation and Risk Taking”. Retrieved Feb 11, 2011 from http://www.newyorkfed.org/research/staff_reports/sr456.pdf
After reading the article “This is the most powerful 30-year-old in Boston” I have been given the impression that Dan Koh is a goal oriented, highly intelligent hard worker. Although Koh is only thirty, his determination and industrious personality led him to become The Chief of Staff for Mayor Marty Walsh. This article contained several valuable elements of advice for me to absorb in order to grow as a successful college student. The three most important elements I took from this article is to have an open mind, accept that mistakes will happen, and be very assertive towards a goal you want to achieve.
CEO compensation has been a heated debate for many years recently, and it can be argued that they are either overpaid or that there payment is justified by the amount of work they do and their performance. To answer the question about whether CEO compensation is justified it must be looked at by the utilitarian viewpoint where the good of many outweighs the good of one. It is true that many CEO’s are paid an exorbitant amount of money; however, their payment is justified by the amount of money that they bring back to the company and the shareholders. There are many factors that impact the pay that the CEO receives according to Shah et.al CEO compensation relies on more than just the performance of the CEO, there are a number of factors that play a rule in the compensation of the CEO including the fellow people who help govern the corporation (Board of Directors, Audit Committee), the size of the company, and the performance that the CEO accomplishes (2009). In this paper the focus will be on the performace aspect of the CEO.
Seitel stated Circuit City’s management responded to the CFO’s departure by offering an additional cash in of $250,000 on top of his $1,000,000 a year (p.218). Management was more concerned about losing one high up employee, but did nothing to help preserve the jobs of 3,400 sales employees. Management should have been counseled to treat all employees with equality and dignity regardless of position. Interestingly, “The firings…are expected to reduce expenses for the electronics retailer by $110 million in fiscal year 2008” (Mui, 2007). In comparison, Circuit City’s CFO’s salary was $1 million. One top-level manager’s pay was almost equal to the total expenses that firing employees cut. This showed that lower level employees are dispensable and not as valuable to the company as a higher level employee
Executive compensation has been studied for many years. While the average person probably does not think about it on a daily basis, it is necessary to watch trends. Tracking the amount of money they make as well as the bonuses, stock options, and other benefits shows how these executives are making such high rates of pay compared to the ordinary worker. Tracking how much an executive makes began in the 1930’s. Since this time not only has it been tracked but there have been many changes in the type of tracking, the tax laws and what is available as compensation. This paper highlights the changes that have occurred since the early 20th century until today and changes that still need to occur.
Another reason is the remuneration is driven more by political than economic considerations. Politics is more concerned with cost of personnel and compensation programs are used as political pawns. Politics is not fond of raising taxes, adjusting budgets, cutting off services etc. in order to increase pay wages. Politics affects compensation more than objective merit which does not inspire confidence in compensation
Pay per performance rewards are not for the benefit of employees not even for the companies. This is a tool to lure and attract the top talent in the market and to exploit it. Pay per performance is a kind of sophisticated bribery system in Senior Vice President and Senior Scholar Lewis C. Solmon and Milken J. Podgursky Professor of Economics and Chair do department of economics in University of Missouri-Columbia, did a research and found the following results:
Does the compensation for Ken Higdon seem excessive” is he like a highly paid executive?
The compensation committee has a difficult task upon its shoulders. It must construct pay programs that attract and retain the best talent to address the individual organization’s needs. It must design a strategy that generates superior returns for investors, appropriately measure managerial performance, and institute a pay practice which is fair to both employees and shareholders and which really drives business results (Mercer p.4). There is abundant theory and research on the strategies thought to accomplish these goals, and the emerging trends in executive compensation seem to be highly successful.
Although at the same time functional goals encourage unnecessary risk-taking and increased the probability of unethical and possibly unlawful behavior (James, 2015). All the same, the purpose of executive compensation is an incentive for well-trained executives that make the most of the firm’s value (James, 2015). Further, the benefit that is put in place for the executive is structured to remove all conflicts of interest amongst the executive and shareholders (James, 2015). Although, some workers feel as though the executive compensation is unethical; but according to James (2015) it is given to the executives that are well trained, therefore, it is ethical from his point of view. Additionally, the compensation package assists as an enticement for executives to participate in potentially risky, maximizing activities, and profits that benefit the shareholders whenever ventures are successful (James,
Trimming fat and reducing management layers is inevitable. However, boosting shareholder wealth by stepping on the stakeholders is immoral and unethical. While it is hard to say definitively what the right answer here was, we can examine some of Kidder’s principles of resolving ethical dilemmas to evaluate the decisions made. For example, ends-based thinking, which refers to doing what is best for the masses, was clearly not accounted for in this decision making process. Shareholders and senior management seemed to be the benefactors in CSC’s example. Furthermore, the care-based thinking principle also seems to have been neglected in this decision making process. I would find it difficult to imagine that senior leaders contemplated their proposed behaviors as if they were the object rather than the agent, and consulted their feelings before determining that 40% of the workforce must fall into the category of not meeting expectations (Hughes et al., 2014). Overall, CSC’s decisions were clearly not entirely moral or
Remuneration management is defined as the sum received for an employment or service delivered, this includes the money received on a monthly basis as well as benefits given as rewards (investopedia,para.1 ). Individualism need to be taken into account when implementing these remuneration structures or reward schemes, equal pay plays a role in balancing earnings among the diverse workforce (Shen, Chanda, D’Neetto and Monga,2009,p.241). The Woolworth’s Holdings uphold remuneration policies which have the purpose of making sure to attract and hold on to the best talent, that they are congruent with the strategies of the company and are the determinants of performance during the short and long phases. The policy considers the board members and the employees. This policy manages employees of the company by giving...
Board membership carries responsibilities that involve a lot of risks, and no body will be motivated to set on the board unless there are some justifiable lucrative rewards for being on the board. So directors, whether executive or non executive must be remunerated however the vital question will be how?
The Remuneration committee should help the board of directors in its responsibility for setting remuneration policies that are in line with the company’s long-term interests. The committee deliberates on and recommends remuneration policies for all employee levels in the company, but it should pay special attention to the remuneration of the company’s senior executives and the remuneration of non-executive directors on the board.