Executive Compensation: Don't Blame The Pay Problem On The Incentive System

533 words - 2 pages

The public has been criticizing about the exorbitant amount of money that CEOs are making and questioning the validity of the compensation system; however, it is the external factors that cause this excessive growth in the executive compensation package rather than the stock options compensation schemes. In Lublin and Thurm's article, Behind Soaring Executive Pay, Decades of Failed Restraints, it suggests that it is the critics' efforts to restraint CEOs' pay that cause the executive compensation to skyrocket over the decades. It was the disclosure requirements that make the compensation plans competitive. Instead, the use of stock options as performance measures does align the stakeholders' incentives with CEOs' incentives.The stock option compensation actually strengthens the link between pay-for-performance for CEOs as "stock option valuations account for 98% of the link between pay and performance for the average chief executive..." (Hall, 2000, 124). Ever since the companies started to use stock options as compensation tool since 1980s, the linkage between pay and performance has increased tenfold because CEOs are treated like owners rather than bureaucrats and they are being paid for the increment of the company's value (Hall, 2000, 124).Stock price embeds "all value-relevant information" about the company where as accounting system only reflects the economic value added information. (Dutta & Reichelstein, 2005, 1069). Value added information such as company reputation and social capital are less likely to be manipulated in comparison to economic information. With stock option incentive in place, managers will strive for the optimal market and economic result instead of constantly trying to meet the bottom line of meeting revenue growth target....

Find Another Essay On Executive Compensation: Don't Blame the Pay Problem on the Incentive System

Compensation Management Explain the need for designing of Compensation Policy. What is the importance of compensation system in business organization?

1146 words - 5 pages IntroductionOrganizations should establish and communicate clear principles by which employees are paid. At a minimum, organizations need to ensure that their compensation policy adheres to employment legislation. Policy guidelines should reflect the thinking, values, and basic strategies of the company, and they must be set consciously and thoughtfully by top management. Before setting compensation policies, management should address some basic...

A Perspective on Corruption: A Look at Executive Compensation

1145 words - 5 pages In the West, practiced corruption is usually portrayed as a pertinent part of life in the developing world. In these so-called developing states, corruption is often deliberate. However, it does exist in the West in more covert forms. In an interview by Amy Goodman and Juan Gonzalez of Democracy Now, Chuck Collins of the Institute for Policy Studies was being asked to elaborate on unequal monetary situation of the United States. The questions...

Compensation Management: What is the role of compensation and rewards in modern organization? What are the advantages of a fair compensation system?

1242 words - 5 pages IntroductionCompensation is an essential and universal component of the management process of every organization. Most organizations want to fulfill their mission, achieve their objectives and maximize return on their investment, particularly on their human capital. Doing so requires that their compensation philosophy, design, delivery and decisions be balanced, fair, focused, and understood by their employee and potential employee...

Blame the Game

823 words - 3 pages Blame the GameNowadays, whenever a teenager or a group of youth commit a crime, many people point fingers at video games being the cause of violence in teenagers of today's time. I disagree with this, as there are more pros than cons when it comes to teenagers playing video games. Video games are known to boost children's social, health and learning skills as well as improve their creativity and imagination. Video games prepare people to make...

The Blame Game

1063 words - 4 pages A witch hunt is usually thought of as a search for witches or practitioners of black magic. Throughout history however there have been many witch hunts, although those who were persecuted were not always called witches. Other names for them were communists, spies, and heretics. The arrests spawned from these witch hunts were usually based on false accusations, and the fates of those on trial, such as those portrayed in Arthur Miller’s The...

Revamping the Mary Kay Incentive Program

1863 words - 7 pages Revamping the Mary Kay Incentive Program Executive Summary This proposal will attempt to revamp the Mary Kay incentive program. The three problems I am going to address are: the morale of consultants, motivational/stagnation of sales, and poor or weak directors and consultants. In addressing these issues I am going to be referencing other business that have used different motivational techniques in these situations. At the end of my...

The Executive Branch

1980 words - 8 pages The Executive Branch The executive branch of our government is like a chameleon. To a startling degree it reflects the character and personality of the President. Clark M. Clifford, 1972 Page 189. Ford was not a natural administrator, but he a was an experienced political professional. His practice was to steer clear of jurisdictional rivalries, avoid having confidants within his cabinet, have private sources...

The Executive branch

814 words - 3 pages The Executive BranchI.The President of the United States: George W. Bushi.Requirements to Hold Office: You must be at least thirty-five years old, a natural born citizen of the United States, and a resident of the US for no less than fourteen years.ii.Duties and Powers: The President must execute laws, commission all officers of the United States, and adjourn or convene both houses. It is also a duty of the President to pass and regulate laws....

The Drug Problem and the Current Justice System

1825 words - 7 pages The Drug Problem and the Current Justice System The United States Correctional System is often challenged as to whether it wants to rehabilitate drug offenders or punish them, and because of this it mostly does neither. Even though drug abuse and drug trafficking are widely spread national issues, the mental, social, and economic costs of "healing" through incarceration are only making the "disease" worse. Never before have more prisoners...

The Economic Problem - Foundations of Free Market System

1338 words - 5 pages Human beings are created to strive and survive in cases of scarce resources; however, is society ready to stand by itself in the case of extreme emergencies where resources are few to be distributed among all the population? This question and others will be covered on this paper. This paper will cover briefly the economic problem and its solution focus in the daily events or activities these days, and in a highly urbanized world.What is the...

The Debate Over CEO Compensation

1779 words - 7 pages This paper will discuss the reasons why CEOs are not being overpaid. It will apply the utilitarian ethical principle to many a few aspects to CEO compensation and whether or not it is justifiable for such pay. The paper will look at whether or not their performance is justifiable for the pay because they play such a big role in the livelihood of the company along with the principle agency theory and how it is being addressed for the benefit of...

Similar Essays

The Pay By Phone System Marketing Research,Come Up With A Product And A Market Research On It To See If It Should Go On The Market Executive Summary Objective & Methodology Detailed Findings...

3118 words - 12 pages The Pay-By-Phone SystemTable of ContentExecutive Summary p.3Objectives p.3Methodology p.5Detailed Findings p.5Conclusions p.13Recommendations p.13Bibliography p.14Appendix p.15Executive Summary40 completed questionnaires were collected from young adults and adults aged 18-to-50 in Montreal, Quebec. Respondents who own a Smartphone and who for the most part purchases snacks from vending machines. This survey was a printable handout questionnaire,...

Don't Blame The Weapon...Blame The Person

1336 words - 5 pages The author believes that stem cell research was a very important scientific discovery and still is today, but now there are many people that are against it. Do to the fact that it requires getting the cells in a way that offends some people because of their religious beliefs. For instance some people of the Christian faith believe it is wrong to get them from aborted babies because they believe that “God” would consider that killing which is...

Effective Of Incentive Pay On Employee Work Performance

1153 words - 5 pages Introduction Today, competition between the organizations is extremely high thus organizations need to find the ways to be competitive. They need to prepare best market strategy to improve the company performance and the ways to keep their employees motivation on the highest level to perform well within the competition. At that time, several incentive pay programs play important role for every organization to perform well within the competition....

This Essay Discusses The Possible Blame On The Fast Food Industry For The Obesity Problem In America Today

1963 words - 8 pages Current Societal Problem: Fast Food and ObesityAmericans may be eating themselves to death. Obesity rates in America have grown from 2.9% of the population in the early 1990s to over 5% in 2000 and it continues to go up every year now accounting for over 20 million Americans. Over 400,000 people a year die as a result of obesity related conditions making obesity the second biggest preventable cause of death, second only to smoking (Maze, 2004)....