Lucion A. Bebchuk and jesse M. (2006).Pay without performance: overview of the issues Academy of Management perspective
1. Organizational Issues: The article discussed many of the organizational issues mainly about the performance and reward that we talk over in text chapter 5. Also, the influence performance of executives’ managers’ power over the board of the corporate structure and how this influence shaped it. The aim is how we can cut the cost of vast executive compensation for the good of shareholders benefit. 2. Importance of issues: from the analysis of the article we found that manager’s position designed and influenced the system of payment of the compensation to be for the benefit of the executive board rather than for the shareholder. This kind of incentives will paid by the shareholder earning profits. There is an argument about this vast compensation that could reach to 9% of the net income of the company some times. This increasing exaggerated compensation causing a worry for the shareholders. So the article imposes some tactics to guardian the interest of the shareholders. The article also mentions the relation of pay and performance. That we could avoid a high executive compensation and argument about the Arm’s-length contracting views that board will set the pay for the benefit of the shareholders. Managers could easily influence the board because they raise compensation of the board and they raise it for themselves also usually they will justify this compensation according to their own benefits and will be as self-serving when they argue it. The article state that the solution would be the Arm’s-Length view but still there is a limitation for this view in reducing the incentive of the CEO. But, it will do the greater good for greater amount of shareholder in cut costing. Also the incentives could be in another way like to be re-elected the board the incentives will be as prestigious position and social networking connections with...
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