Executive Compensation
The role of compensation in organizational behavior is an important one as it is used as a key tool by management to achieve social control over its employees (Pfeffer, 1997, p.102), the primary assumption being that compensation packages affect attitudes and behavior. This is seen as particularly true of executive level compensation on the grounds that management must be sufficiently motivated if organizational objectives are to be met and so that, they in turn, succeed in motivating the rest of the organization: "Because of the importance of money as a motivational factor, the compensation function is quite significant. Its performance involves developing a philosophy of what wages should be; developing theories as to the source of wages...relating compensation to individual jobs; arriving at individual differentials in pay...." (Megginson, 1972, p. 50)

Though compensation may undeniably be an important factor, several research studies have shown that the role of compensation may…...

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References

Hopkins, W.E., Mallette, P., & Middlemist, R.D. (1995). "Social, Political and Economic

Determinants of Chief Executive Compensation." Journal of Managerial Issues. Vol. 7:3, p. 253+

Megginson, L.C. (1972). "Personnel: A Behavioral Approach to Administration."

Homewood, IL: R.D. Irwin.

In order to compare the executive compensation in both countries, the countries firms should be matched and compared according to industry, size and operation. The executive compensation can be measured or compared accurately according to the industry and firms sizes. From the data, it was found that the executive compensation in both countries were high whereas the firm performance was reducing. The data collection for the executive compensation in both countries provides the detail information on the executive salary. Executive compensation can be divided into four main categories such as salary, bonus, benefits and long-term incentive plans. These benefits include the incentives like medical, life insurance, pension allowances plan and many other incentives. Bonuses and benefits are the short-term compensation and these are the part of the salary packages. The components of long-term incentive plans are the stocks and shares. The long-term incentive plans or the stock base compensation…...

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Works Cited

Frydman, Carola and Saks.E.Raven. " Executive Compensation: A New View for Long

Term Perspetive," 6 July 2007. Web. 23 June 2012.

Jiang, Weiwei. "Ownership Structure and Executive Compensation in Canadian

Corporations," University of Saskatchwan, Canada, April 2011. Web. 21 June 2012.

Those days are likely over, for a variety of reasons, including shareholder concerns about the ever increasing dilution due to the issuance of options and new accounting rules requiring companies to expense options... In addition, studies have shown that the accounting cost of stock options exceeds employees' perceived value of those options. Finally, there has been a crisis in governance that has caused a reexamination of corporate accounting standards. No wonder some feel that stock options are dead in the water."
Compensation committees are now facing serious challenges. It is the job of the committee to have a valid, sound and sensible pay philosophy in order to determine compensation that best suits the company policy and shareholders interests: "...compensation committees must decide how to use a company's pay philosophy to best advance its overall business principles and goals."

Stakeholders are now expecting compensation to be closely tied with performance because it…...

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References

Young Baek, Jose a. Pagan. Executive Compensation and Corporate Production Efficiency: A Stochastic Frontier Approach. Contributors: Quarterly Journal of Business and Economics. Volume: 41. 2002. 27+.

Use Best Practices in Executive Compensation Plans. Journal of Accountancy. Volume: 193. Issue: 6. 2002. 22.

Shamsud D. Chowdhury, Eric Wang. CEO compensation: Turning conventional wisdom on its head (almost Ivey Business Journal Online London: Nov/Dec 2004. p. D1

Randy Myers. Why compensation committees need your help Journal of Accountancy New York: Dec 2002. Vol. 194, Iss.6, p. 65-71 (7 pp.)

This talent does need to be retained.
ith respect to the executives who were involved in mortgage-backed securities, however, this argument holds little water. These are not talented individuals, as demonstrated by the substantial losses their actions have inflicted upon the company. They are not the sort of employees that the firm should be seeking to retain. It is only due to the outdated or erroneous perception that these individuals cannot be replaced that they are still valued at all.

Eventually, shareholders will acquire more direct control over executive compensation. Until that time, however, the distortions in the market will still exist, as long as the perception of scarcity of talent persists. As more shareholders re-align executive compensation with long-term results, this perception will diminish. Until then, executives will be paid more than they are worth, putting shareholder value at risk.

orks Cited

Kopecki, Dawn & Goldman, Julianna. (2009). Obama Calls Bonuses Shameful…...

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Works Cited

Kopecki, Dawn & Goldman, Julianna. (2009). Obama Calls Bonuses Shameful and as Dodd Vows to Reclaim Money. Bloomberg. Retrieved February 27, 2009 at  http://www.bloomberg.com/apps/news?pid=20601087&sid=anzJooSeABDM&refer=home 

Oliphant, James. (2009) Stimulus' Cap on Executive Bonuses is Too Sweeping, Experts Warn. Los Angeles Times. Retrieved February 27, 2009 at  http://www.latimes.com/news/nationworld/nation/la-na-stimulus-executive-pay15-2009feb15,0,7786166.story 

Friedman, Milton. (1970). The Social Responsibility of Business is to Increase its Profits. New York Times Magazine. Retrieved February 27, 2009 at  http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html 

Balsam, Steven. (2007). Frontline Reaction to FASB 123(R) Journal of Accountancy. Retrieved February 27, 2009 at  http://www.journalofaccountancy.com/Issues/2007/Apr/FrontlineReactionToFasb123.htm

Part of the reason for this, is because shareholders and the board of directors are allowing this to occur. To prevent the situation from becoming worse, shareholders and the board need to be more independent, by questioning the motives / actions of management. At the same time, there must be some kind regulations in place that can prevent the runaway abuses from occurring. If this kind of strategy can be implemented, it will reduce the abuses that are taking place, by letting management know that this behavior is no longer acceptable. At which point, the underlying amounts of compensation, will be tied directly to the performance of the individual vs. their position in the company.
ibliography

Case Studies: Citigroup. AFL CIO, 2010. Web. 24 Oct. 2010.

Citi 2009 Annual Report. Citigroup. 2010. Web. 24 Oct. 2010.

Trends in CEO Pay. AFL CIO, 2010. Web. 24 Oct. 2010.

Chazan, Guy. Shell Plans…...

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Bibliography

Case Studies: Citigroup. AFL CIO, 2010. Web. 24 Oct. 2010.

Citi 2009 Annual Report. Citigroup. 2010. Web. 24 Oct. 2010.

Trends in CEO Pay. AFL CIO, 2010. Web. 24 Oct. 2010.

Chazan, Guy. Shell Plans to Reduce Executive Salaries. WSJ, 2010. Web. 24 Oct. 2010.

Executive Compensation Programs and Incentives
In 1996 the average salary plus bonus for CEOs was $2.3 million. After other benefits were added, this sum rose to $5,781,300. Beginning with Revlon executive Michael Bergerac who broke the $1 million mark in 1974, executive pay and bonus plans have soared to mind-boggling proportions. Although various governmental agencies have set limits on tax-deductible executive compensation, these efforts not only failed but served to raise the bar on executive compensation even higher (Milkovich and Newman 455). In general, the CEO of a corporation makes at least twice as much as the next highest paid executive and 35 times the salary of the average worker (Bogie 118). This pay disparity becomes even more alarming when bad leadership causes mass layoffs and shareholder losses even as top executives continue to receive their oversized pay.

Executive compensation consists of five basic components: 1) base salary, 2) annual incentives /…...

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Works Cited

Bogie, Mord. Churchill's Horses and the Myths of American Corporations: Power, Stakeholders, and Governance. Westport, CT: Quorum Books, 1998.

Bohlander, George, Scott Snell and Arthur Sherman. Managing Human Resources. 12th ed. Ohio: South-Western College Publishing, 2001.

Dovring, Folke. Inequality: The Political Economy of Income Distribution. New York: Praeger Publishers, 1991.

Mathis, Robert L. And John H. Jackson. Human Resource Management. 9th ed. Ohio: South-Western College Publishing, 2000.

They are required to negotiate with the employers for more elastic contracts and provide incentive to the productive employees. The right-to-work laws generate economic exchanges. The enhanced demand for labor making the worker scarcer and therefore more worthy, results in out of the right-to-work laws. It is evident that the right-to-work laws entail benefit to the workers in crucial fields such as the availability of jobs. The right-to-work states were emerged to be the superior job producers during the past two decades as revealed by the U.S. Bureau of Labor Statistics. The advocators put forth that the analysis indicates even more advantages for the right-to-work states in the coming years. (the Economic Case for ight-to-Work Laws)
The critics held that the ight-to-Work Laws are not an antidote. There exist several right-to-work states that appear to fight economically while the non-right-to-work states are seen to have much economic prosperity. The workers…...

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References

Iacobucci, Edward M. (Fall 1998) "The Effects of Disclosure on Executive Compensation" University of Toronto Law Journal. Volume XLVIII; Number 4. Retrieved from www.utpjournals.com/product/utlj/484/484_iacobucci.html. Accessed on 10 December, 2004

Issue Brief: 'Right to Work'" Retrieved at   Accessed on 10 December, 2004http://www.iamaw.org/publications/Legislative_Issues/CoreLaborLawIssues/Right_to_Work.pdf .

Kersey, Paul. "The Economic Case for Right-to-Work Laws" Retrieved at   Accessed on 10 December, 2004http://www.capitalresearch.org/pubs/pdf/x3800850718.pdf .

Murphy, Kevin J. (October 1995) "Executive Compensation and the Modern Industrial Revolution" University of Southern California. Retrieved at   Accessed on 10 December, 2004http://www-rcf.usc.edu/~kjmurphy/kjmijio.pdf .

Out of the previous two CEO's, Apotheker has by far the most experience. What more intriguing is that he has experience with both the entrepreneurial and corporate aspects of business? This provides a competitive advantage for HP as it has further know how in regards to new venture planning. It can also recognize viable new enterprises better as a result of the knowledge gained from Apotheker. Finally, Apotheker has extensive international experience which is of extreme importance in our global economic environment. This again can be utilized for HP's benefit in the future, as Apotheker undoubtedly has extensive international contacts to help his business.

With Apotheker extensive experience, I would venture to say that HP will move internationally. This in my opinion would a large priority as its U.S. market is heavily saturated and congested. As a result, many companies are battling to attract the same customers. This corporate warfare can…...

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References

1) "Exec Bio." The Network. Web. 28 July 2011. .

2) "John T. Chambers." Cisco Biography. Jan. 2001. Web. 28 July 2011. .

3) "CSCO: Summary for Cisco Systems, Inc. - Yahoo! Finance." Yahoo! Finance - Business Finance, Stock Market, Quotes, News. Web. 28 July 2011. .

4) "ALU: Summary for Alcatel-Lucent Common Stock- Yahoo! Finance." Yahoo! Finance - Business Finance, Stock Market, Quotes, News. Web. 28 July 2011. .

The Perils of Executive CompensationIntroductionExecutive compensation acts as an incentive for CEOs to enhance an organizations performance and is common practice across industries. Michael Eisner was famously rewarded handsomely via executive compensation for his stewardship of Disney in the 1990s (Downes et al., 2007). Elon Musk has even more famously accrued substantial personal wealth via executive compensation for meeting targets related to Teslas share price (Jones, 2021). While executive compensation may appear to be a positive perk that drives executives to push the company forward, there are conflicts of interest that should be considered from a risk management perspective. As Brickley et al. (2016) note, in the early 2000s governance scandals generated public concerns about whether managers run corporations primarily for their own benefit (e.g., to receive excess compensation and perquisites), as seen in companies like WorldCom (p. 583). It 2021, with Elon Musk making many several billions of dollars…...

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References

Baldwin, R. (2020). Elon Musk says Tesla robotaxis will still be ready in 2020. Retrieved from  https://www.caranddriver.com/news/a32159871/tesla-robo-taxis-still-coming-2020/ 

Brickley, J., Smith, C. & Zimmerman, J. (2016). Managerial economics and organizational architecture. McGraw Hill Education.

Choi, C. J., & Maldoom, D. (1992). A simple model of buybacks. Economics

Executive Compensation
Sometimes it seems that the salaries executives make at big corporations are entirely out of proportion with the value added to the firm by their being on the payroll. It makes sense that if someone, anyone, makes a certain wage, then they should be making at least that much money for the company. If someone is pumping gas for $7/hr, then he should be pumping at least $7 worth of gas every hour. If someone else is making $30 million/year at a big corporation, then he should be bringing in at least that much revenue, even if only indirectly. If a $30 million/year executive starts programs at the company that make $100million, then the $30million the company pays him is well-worth it. The trouble is that it is sometimes hard to decide the degree to which company performance is the result of an exec's contribution.

If we cannot establish…...

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References

1. Plishner, Emily S. (2004, Sept. 22). Executive Compensation. Chemical Week. 166(31), 21-28.

2. Kadlec, Daniel; Fonda, Daren; McDowell, Jeannie; Steptoe, Sonja (2004, June 14). The Lion In Sumner. Time. 163(24), 68-70.

3. Executive Pay. (2004, May 10). Forbes. 173(10), 124

4. Lavelle, Louis; Arndt, Michael. (2004, Feb. 23). Living Large In The Corner Office. Business Week, 3871, 47

Components of an Executive Compensation Plan
There are five basic components of an executive compensation plan:

Basic salary: although formal job evaluation still plays a crucial role in determining executive base salary, other sources tend to be more important. Most important is the opinion of a compensation committee, usually composed of the organization's board of directors. In most cases, the compensation committee takes over some information analysis previously done by the chief human resource manager (Samsa & Scheidt, 2013). This goes as far as analyzing performance records and salary survey data for executives of comparable firms. Executive compensation committees use the approach of identifying the main competitors and setting the executive's compensation at a level between the worst and best of these comparison teams.

Bonuses or short-term incentives: in most cases, annual bonuses are essential in executive compensation and are fundamentally designed to encourage better performance. Strikingly, the popularity of this compensation…...

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References

Henderson, R.I. (2006). Compensation management in a knowledge-based world (10th ed.). Upper Saddle River, NJ: Prentice Hall.

Samsa, M.K., & Scheidt, K.S. (2013). International employee equity plans: Participation beyond borders. The Hague [u.a.: Kluwer Law International.

Attention to this and other metrics will be used in determining performance and thus compensation.
J.P. Morgan Chase's accounting statements tell a similar though less extreme story. Non-interest revenue climbed substantially in 2009 after a significant drop in 2008, but have remained essentially flat over the past two years and over the five-year period. Interest income has shown a fairly steady decline, and though interest expenses are now a fraction of what they were four years ago the net revenue gains this has contributed to appear to be at an end, with interest expense unlikely to drop lower and with income and revenue both decreasing or at least flat lining. Compensation expenses have not showed the strong upward trend observable in Bank of America, but they have been subtly and steadily climbing despite poor performance. Though compensation does not appear to be as out-of-tune with performance at J.P. Morgan Chase…...

It has been shown that the acquisition of talent not an area specific to each individual position at top companies. The highest-performing companies build pools of talent from which they can draw as needed (Michaels et al., 2001). Thus, there will inevitably be talented people who are at times underutilized. Their higher-order needs are not being met and thus they must be generously compensated. Otherwise, when the time comes to move someone from the organization to a fulfilling, higher-order executive position, the talent will not be there.
CEO pay proponents also point out that the bulk of the "excessive" executive compensation comes in the form of stock or options. These instruments were brought into executive compensation packages specifically to align the interests of management with those of the shareholders. It was the shareholders and the boards of directors who initiated this, as a means to protect shareholder wealth. There have…...

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Works Cited:

Taub, Stephen. (2006). CEO Pay is Too High, Directors Say. CNN. Retrieved May 1, 2009 from  http://www.cfo.com/article.cfm/8027003/c_8027107 

FASB Statement 123 (1995). Retrieved May 1, 2009 from  http://www.fasb.org/st/summary/stsum123.shtml 

FASB Statement 123R (2004). Retrieved May 1, 2009 from  http://www.fasb.org/st/summary/stsum123r.shtml 

Case: Compensation and Governance at WorldCom. (2002) NYU Stern. Retrieved May 1, 2009 from  http://pages.stern.nyu.edu/~lcabral/teaching/worldcom.pdf

hen he, representing the de facto shareholders the American taxpayers, found the executive compensation plans were out of line with the objectives of said shareholders, he acted.
In the free market system, this is the only response. Shareholders have rights and duties as the owners of companies. The executive team acts as their agents. The shareholders have not only the right but the capability to fire boards of directors and by extension executives whose compensation does not match their performance. The public outcry with respect to excessive compensation typically occurs when shareholders neglect their duty. Yet, there are examples where the shareholders have upheld their duty. These firms -- the majority -- do not make headlines, giving the impression that executive compensation is a rampant problem in society. If a company dares to pay bonuses will laying off workers or reducing their wages, the outcry hits the front page. However,…...

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Works Cited:

Quijano, E. (2009). Obama tries to stop AIG bonuses. CNN. Retrieved December 3, 2009 from  http://edition.cnn.com/2009/POLITICS/03/16/AIG.bonuses/index.html 

Mehran, H. (1995). Executive compensation structure, ownership and firm performance. Journal of Financial Economics. Vol. 38 (2), 163-184.

Mullen. E. & Guigliano, G. (2009). Recoverability of equity-based compensation deferred tax assets. Journal of Accountancy. Retrieved December 3, 2009 from  http://www.journalofaccountancy.com/Issues/2009/Jan/JanTPC.htm 

Lagace, M. & Khurana, R. (2002). The irrational quest for charismatic CEOs. Harvard Business School. Retrieved December 3, 2009 from  http://hbswk.hbs.edu/item/3095.html

Executive Stock Option Plans
"If the company does not do better than its competitors, but the stock market goes up, executives do very well from their stock options. This makes no sense." Discuss viewpoint. Can you think of alternatives to the usual executive option plan that take the viewpoint into account?

Executive stock options are performance-based incentive plans that became popular in the 1950s and 1960s. They declined due to the stock market crash of the 1970s, but returned aggressively returned in the 1990s (Kole, 1997). Today, most companies grant stock options to their top officers as part of executive compensation, along with salary and bonuses. Options that are awarded as part of a compensation package can be very valuable to executives when stocks are performing well. The challenge comes in when stock value is realized for executives even when a company is not faring well at all. This is problematic.

In general,…...

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References

Cicero, D.C. (2009). The manipulation of executive stock option exercise strategies: Information timing and backdating. Journal of Finance, 64(6), 2627 -- 2663.

Collins, D.W., Gong, G., & Li, H. (2009). Corporate Governance and Backdating of Executive Stock Options. Contemporary Accounting Research, 26(2), 403-445.

Hamilton, S. And Wise, D. (2008). Adding performance criteria to your stock options. Hay Group. Retrieved from http://208.254.39.65/haygroupusmkting/e_article001162460.cfm.

Hess, D. (2012). More Stock Rewards Tied To Performance. Crain's New York Business, 28(31), 0015.

In conclusion, the intricate relationship between managerial compensation and financial reporting quality is a critical aspect of corporate governance. Various compensation plans, particularly performance-based incentives, can influence managerial actions and impact the accuracy of financial disclosures. The delicate balance between incentivizing transparency and minimizing the risk of earnings manipulation highlights the complexities of aligning incentives with sustainable business practices. It is evident that executive compensation, especially stock options tied to stock price, can significantly affect financial reporting quality and may lead to misreporting behaviors. Equity-based compensation has been linked to incentives for misreporting, while regulatory efforts to promote whistleblowing can....

Impact of Management Compensation on Financial Reporting Quality
Management compensation is a crucial aspect that can significantly influence the quality of financial reporting. The alignment between compensation structures and financial reporting practices affects the incentives and behaviors of executives, which in turn impact the reliability and accuracy of financial statements.
1. Performance-Based Compensation and Financial Reporting Manipulation
Performance-based compensation schemes, such as stock options or bonuses tied to financial targets, create incentives for executives to manage earnings to meet or exceed these targets. This can lead to aggressive accounting practices and the manipulation of financial data to present a more favorable financial picture.
2.....

Corporate governance plays a crucial role in determining the performance and sustainability of organizations, especially in the industrial engineering sector. This essay investigates the relationship between corporate governance practices and performance within the context of companies listed on the Bursa Malaysia. By analyzing data and evidence from the industrial engineering sector, this study aims to provide insights into how effective corporate governance mechanisms can enhance financial performance and overall success of organizations in the Malaysian market.


One key aspect of corporate governance that impacts performance in the industrial engineering sector is the composition and effectiveness of the board of directors. A....

1. In todays business world, the topic of executive pay levels in relation to company performance is a contentious issue that has sparked numerous debates and discussions. Executive compensation has been on the rise in recent years, with some CEOs and other top executives earning substantial salaries, bonuses, and benefits. At the same time, there are concerns about whether these pay levels are truly justified based on the performance of the company and its outcomes. This essay will delve into the various factors that come into play when determining executive pay levels and whether or not they align with the....