Executive Compensation
COMMENT
EXECUTIVE COMPENSATION DURING ECONOMIC TURMOIL
Student[1]
I. INTRODUCTION
The economic downturn in late 2008 brought forth the resurgence of an interesting topic - executive compensation. This topic was bound to bring much controversy as a result of the dramatic increase in executive compensation over the last decade[2] and the recent massive failure of many large companies.[3]
Adding to the public interest was the 2008 United States Presidential Election, which featured two candidates taking very strong stances on executive compensation.[4] As a result of the recent economic downturn, the government stepped in to try to prevent the economy from an even greater downturn, and as a result, restricted the compensation allowed for high-ranking executives of companies receiving bailout funds.[5]
The banking and investment crisis in 2008, the transition of Presidents, and legislation including the Emergency Economic Stabilization Act of 2008 (“Bailout”) and the American Recovery and Reinvestment Act of 2009 (“Stimulus package”), provide us with a great platform for a discussion on the topic of executive compensation. The goal of this article is to give a thorough overview of executive compensation as it exists in our society today. This article will examine executive compensation as it was,[6] as it is,[7] and what it might be in the future.[8] Also included in this article will be an examination of who sets executive compensation[9] and how it should be set.[10]
II. BACKGROUND ON EXECUTIVE COMPENSATION
A. Pre-1993 Law
Prior to 1993, “there was no specific limit on the amount of deductible compensation.”[11] Companies were able to use compensation paid to employees for tax deductions to help save money by paying fewer taxes. Also included in this tax deduction was the salary of the top executives, even the chief executives at very large corporations.[12] There was governmental concern
EXECUTIVE COMPENSATION DURING ECONOMIC TURMOIL
Student[1]
I. INTRODUCTION
The economic downturn in late 2008 brought forth the resurgence of an interesting topic - executive compensation. This topic was bound to bring much controversy as a result of the dramatic increase in executive compensation over the last decade[2] and the recent massive failure of many large companies.[3]
Adding to the public interest was the 2008 United States Presidential Election, which featured two candidates taking very strong stances on executive compensation.[4] As a result of the recent economic downturn, the government stepped in to try to prevent the economy from an even greater downturn, and as a result, restricted the compensation allowed for high-ranking executives of companies receiving bailout funds.[5]
The banking and investment crisis in 2008, the transition of Presidents, and legislation including the Emergency Economic Stabilization Act of 2008 (“Bailout”) and the American Recovery and Reinvestment Act of 2009 (“Stimulus package”), provide us with a great platform for a discussion on the topic of executive compensation. The goal of this article is to give a thorough overview of executive compensation as it exists in our society today. This article will examine executive compensation as it was,[6] as it is,[7] and what it might be in the future.[8] Also included in this article will be an examination of who sets executive compensation[9] and how it should be set.[10]
II. BACKGROUND ON EXECUTIVE COMPENSATION
A. Pre-1993 Law
Prior to 1993, “there was no specific limit on the amount of deductible compensation.”[11] Companies were able to use compensation paid to employees for tax deductions to help save money by paying fewer taxes. Also included in this tax deduction was the salary of the top executives, even the chief executives at very large corporations.[12] There was governmental concern