CEO COMPENSATION Essay

Submitted By vtandoc

Words: 428

Pages: 2

Open Document

Is CEO Compensation Justified by Performance? The salaries of CEO’s today are very high compared to what it was back in the day. In economic booms, the salaries of CEO’s have skyrocketed and when the economy goes down the salaries of the CEO’s attracts the public’s attention. CEO pay is a controversial issue in the Unite States especially after the Financial Crisis of 2008. CEO’s are definitely getting paid too much for various reasons stated by former CEO Edgar Woodard Jr. There are four myths about CEO pay according to Woolard. The first myth is CEO pay is driven by competition. The second myth is about compensation committees are independent. The third myth is about how much wealth CEO’s are creating. The fourth and final myth is about severance for failing. According to Woolard, CEO pay is not driven by competition. The pay of today’s CEO is driven by outside consultant surveys and board member buying into a concept. The concept that the board members are buying into is that the CEO of your company has to be paid in the top half. Woolard suggests that in order to solve this problem is for the board members to suggest the human resources and compensation people to look at the internal pay equity and make the decision of what to do regarding the situation of the internal pay equity. Woolard thinks that the compensation committees haven’t been independent for the last fifteen years. Compensation committee’s would have consultants that would have surveys to support paying anything you want to pay. The consultant would then to talk to human resource vice president that talks to the CEO

Executive Compensation Essay

Executive Compensation (Introduction) A compensation package is usually design to motivate the executive performance in accordance to the risk tolerance and the company objective of a firm. Hence, an executive compensation is known to be an important role where the CEO of the firm oversees how the company is operating. At certain times as the CEO of the company does not share the same information, agency problem could arise due to this. An agency problem arises when there is a separation of ownership…

Words 612 - Pages 3

Summary: Annotated Bibliography

Annotated Bibliography Bebchuk, Lucian Arye, and Jesse M. Fried. “Executive Compensation as an Agency Problem.” Journal of Economic Perspectives, vol. 17, no. 3, Summer 2003, pp. 71–92, doi: 10.1257/089533003769204362. This article from an academic journal discusses how executive compensation is derived and evaluates the risk that CEOs might not make decisions that are in the best interest of the stockholders. One author of this article, Lucian Arye Bebchuk, is a professor of law, economics, and…

Words 962 - Pages 4

Executive Pay Research Paper

There has been a public debate over executive compensation for decades. However, concerns over executive compensation have increased in recent years due to the financial crisis of 2007-2008 and rising income inequality. Economists mostly agree that executive pay arrangements contributed to the excessive risk-taking of companies during the years leading up to the financial crisis. Many companies paid their executives excessive bonuses and compensation, which rewarded, and even encouraged, risky behavior…

Words 519 - Pages 3

Bebchuk and Fried Sample answer Essay

Fried against executive compensation practices in US corporations. Answer: Bebchuk and Fried (the authors) take the following dual approach to the analysis of executive compensation contracts: 1. That, as designed by the board and shareholders, contracts help alleviate agency problems between managers and shareholders (the “optimal contracting” approach). 2. That they are a part of the agency problem itself (the “managerial power” approach). While the traditional compensation literature takes the optimal…

Words 908 - Pages 4

Hasbro information for week 4 Essay

growth, operating margin and returns for company and business unit performance, as well as an individual component. 1.2 Purpose Hasbro, Inc., herein referred to as “the Company”, has established this plan for the purpose of providing incentive compensation in the form of a cash supplement to the base salaries of those officers, managers, and key employees who contribute significantly to the growth and success of the Company’s business; to attract and retain, in the employ of the Company, individuals…

Words 2284 - Pages 10

Econ: Economics and Principal-agent Problem Essay

to write about is the issue number 2, which is “Should the compensation of executives be subject to government regulation?”. The question of whether CEOs of major companies are overpaid has been a constant subject of interest for many years with so many different answers and opinions about it. But, nowadays, this question has taken a bigger dimension. The reason why more people are concerned right now than in the past about the compensation of executives and the reason why the government has started…

Words 942 - Pages 4

Executive Compensation Essay

Executive Compensation United States compared with selected European Countries Executive compensation is not only highly debated within the United States, however. It has drawn attention worldwide but the lack of international pay data has left many researchers with the United States as the most suitable testing ground for agency theory (Conyon & Schwalbach 1999). Generally studies conducted in one country alone due not yield strong empirical data because of the uniformity of institutional…

Words 912 - Pages 4

Rewarding social responsibility at the top Essay example

including these types of criteria in compensation schemes. 1 Professor, Strategic Management, IESE Keywords: social performance criteria, incentive systems, executive compensation. IESE Business School-University of Navarra PROS AND CONS OF REWARDING SOCIAL RESPONSIBILITY AT THE TOP Introduction Every year, leading newspapers and business magazines compete to see who can appear most outraged about how much the top corporate chief executive officers (CEOs) were paid during the previous year.…

Words 4286 - Pages 18

Designing a Managerial Incentives Contract Essay

Question1: High CEO Effort; Expected shareholders’ value = $1,000,000,000(0.3) + $800,000,000(0.4) + $500,000,000(0.3) = $770,000,000 Low CEO Effort; Expected shareholders’ value = $800,000,000(0.3) + $500,000,000(0.4) + $300,000,000(0.3) = $530,000,000 Improved shareholders’ value due to high CEO effort; Amount worth to shareholder for high CEO = $770,000,000 - $530,000,000 = $240,000,000 Question 2: Payment of bonus should be based on 1% of the improvement…

Words 1423 - Pages 6

Essay about Microsoft Compensation and Benefit System

Compensation and Benefits System of Microsoft MGMT 365 February 23, 2014 Compensation and Benefit System of Microsoft Microsoft was founded in 1975, and is the worldwide leader in software, services, and solutions (Career). Microsoft is proud to offer great products and employ outstanding people. Previous Microsoft CEO, Steve Ballmer once said, “There are many things that are true about Microsoft. We have big goals, big dreams, and big aspirations for the future. We are both competitive…

Words 1646 - Pages 7