Executive Compensation
MEANING OF EXECUTIVE COMPENSATION
Executive Compensation is defined as a financial compensation received by an executive of a firm. It typically includes elements like salary, bonuses, shares, stocks benefits etc. In simpler words it is a legal agreement between two consenting adult parties. It is an important aspect of Corporate Governance and is determined by the board of directors.
In spite of being voluntary agreement these compensation benefits are condemned of being unjust and non transparent for numerous reasons. Some believe that it is unfair and non transparent that there exists a humungous difference between the salaries of the executives and those at the bottom of the corporate ladder while on the contrary others believe that senior executives are worth what they are being paid. The point of discussion is about equity or the lack of it. So here there are aspects of corporate ethics and compliance being introduced.
Executive Compensation is of various types like: Cash Compensation, Option Grants, Deferred Compensation, Long Term Incentive Plans, Retirement Packages and Executive Perks. There are related controversies against each that showcase both sides of the coin.
RELATED ISSUES AND CHALLENGES
Executive Compensation is symptomatic of the larger challenges in the society. It is beyond the purview of greed for money and exercise of power. It has various issues related to it. A few of them have been listed below.
a) Missing element of ethics
In any organization it is imperative to have an ethical culture which defines the right means of earning money. An absent ethical culture might lead to the short term benefits but might prove to be dangerous for the long term goals. An illustration for the same had been the Enron case, where the fraud permeated to the lower level employees who believed in short term plans and unethically met the compensation targets. And the same was fostered as the people in the organization became more competitive and
Executive Compensation is defined as a financial compensation received by an executive of a firm. It typically includes elements like salary, bonuses, shares, stocks benefits etc. In simpler words it is a legal agreement between two consenting adult parties. It is an important aspect of Corporate Governance and is determined by the board of directors.
In spite of being voluntary agreement these compensation benefits are condemned of being unjust and non transparent for numerous reasons. Some believe that it is unfair and non transparent that there exists a humungous difference between the salaries of the executives and those at the bottom of the corporate ladder while on the contrary others believe that senior executives are worth what they are being paid. The point of discussion is about equity or the lack of it. So here there are aspects of corporate ethics and compliance being introduced.
Executive Compensation is of various types like: Cash Compensation, Option Grants, Deferred Compensation, Long Term Incentive Plans, Retirement Packages and Executive Perks. There are related controversies against each that showcase both sides of the coin.
RELATED ISSUES AND CHALLENGES
Executive Compensation is symptomatic of the larger challenges in the society. It is beyond the purview of greed for money and exercise of power. It has various issues related to it. A few of them have been listed below.
a) Missing element of ethics
In any organization it is imperative to have an ethical culture which defines the right means of earning money. An absent ethical culture might lead to the short term benefits but might prove to be dangerous for the long term goals. An illustration for the same had been the Enron case, where the fraud permeated to the lower level employees who believed in short term plans and unethically met the compensation targets. And the same was fostered as the people in the organization became more competitive and
References: http://www.worldatwork.org/adimComment?id=56300&from=cf_editorial_4111# http://www.law.harvard.edu/programs/olin_center/papers/pdf/421.pdf http://knowledge.wharton.upenn.edu/article/current-controversies-in-executive-compensation-issues-of-justice-and-fairness/# http://harvardmagazine.com/2010/05/the-pay-problem http://www.complianceweek.com/two-tales-of-ethics-compliance-and-compensation/article/281826/# http://www.littler.com/practice-areas/executive-compensation http://www.slideshare.net/kartiksahni/executive-compensation