Free Essay

Executive Compensation

In:

Submitted By dipanjana
Words 1768
Pages 8
The objective of a properly designed executive compensation package is to attract, retain, and motivate CEOs and senior management. Despite substantial heterogeneity in pay practices across firms, most CEO compensation packages contain five basic components: salary, annual bonus, payouts from long‐term incentive plans, restricted option grants, and restricted stock grants. In addition, CEOs often receive contributions to defined‐benefit pension plans, various perquisites, and, in case of their departure, severance payments It has been seen that the increase in executive compensation has far outweighed the rise of regular employee compensation the objective of this paper is to investigate the pay-for-performance link in executive compensation.
In the context of executive compensation, an analysis needs to be undertaken both from an economic as well as a regulatory policy perspective. To provide a holistic understanding both global as well as Indian Organisations are considered for the analysis.

From the economic perspective we look into the following
• Executive Compensation and Agency Problem
• Executive Compensation and Risk Management
• The sensitivity of CEO wealth to firm performance
• The relation between CEO incentives and firm value
• Explaining CEO compensation: Rent extraction or competitive pay?
From the regulatory and legal perspective
• Regulatory controls as under o SEC o SEBI
• Tax Code Changes o Tax Law 162(m) signed in 1993 of the Federal tax Code
• Legal Provisions o Amendments to the Companies Act ,1956 o Natural law
• Disclosure Rules
• Say On Pay
• Clawbacks
Further to look into the recent empirical studies to understand the present industry situation.
• Disclosure Rules
The Securities and Exchange Commission (SEC) has focused its regulatory efforts since the
Securities Acts of 1933, including the aforementioned changes of 1942 and 1978, predominantly on disclosure rules. Under the assumption that disclosure of executive compensation packages effectively shames boards into doing right by their shareholders and employees, a steady stream of decisions by the SEC over more than 70 years made disclosure of compensation policies more transparent, more comprehensive, and more comparable from firm to firm. Put more formally, transparent disclosure reduces the costs of shareholder monitoring of corporate board decisionmaking, and in theory, reduces agency issues between them.
This culminated in the 2006 rule, where the SEC created the “Compensation Discussion and Analysis (CD&A)” filing, in which companies are expected to disclose all prior and potential payments, of any form or function. Notably, perks, severance, and retirement packages, as well as payout ranges for incentive plans, must be clearly spelled out.28
Today the United States has perhaps the most comprehensive executive compensation disclosure rules of any country.
Yet, as disclosure increased over time, so has executive pay, implying that disclosure rules are, in the end, ineffective. For one thing, even with a well-constructed disclosure scheme, corporate boards and their compensation consultants may seek increasingly opaque forms of compensation (such as time on the company jet), which are more costly, dollar for dollar, than simply paying the executive what it is they think he or she is worth in cash, just to avoid the public outrage that follows disclosure of seemingly exorbitant remuneration.
Second, as compensation consultant James F. Reda pointed out to The New York Times, compliance to the 2006 rules. has been further limited by a large loophole that excuses companies from providing details on performance targets if publishing them would put the firm at a competitive disadvantage. Namely, if a competitor knows a firm’s performance benchmark, and knows that in a bad year executive bonuses will be meager or foregone, the competitor could move in to steal away the firm’s executives with better offers. Of course, many companies have claimed this loophole.

• Say On Pay
Given the challenges regulating executive compensation levels through rule-based tax penalties and disclosure policies, a superior approach to combat ill-designed or inappropriately generous pay packages may be in the offing: Shift additional power to shareholders through binding or advisory votes on compensation issues so that they may effectively prod the board to refine poorly designed proposals to better represent shareholder interests.30 These “say on pay” powers are increasingly common in Europe but are rarely granted by firms in the United States. In 2006, a campaign led by the American
Federation of State, County, and Municipal Employees attempted to push more than 60 companies to accept advisory say on pay votes
The most important development in regards to United States adoption of this rule was the inclusion of a say on pay requirement into the American Recovery and
Reinvestment Act of 2009.
Whether say on pay requirements in the United States will achieve the desired goal of shaming boards into enacting responsible compensation policies depends a great deal on the particulars of American firms. On the one hand, as previously mentioned, the United States has far more comprehensive disclosure rules than European countries. So active investors are perhaps in a better position to judge the merits of compensation packages here, and to use dissenting say on pay votes to better align pay to their own aims. But on the other hand, the US market is more diverse, with more players holding small, non-controlling interests in firms, making it more difficult for them to coordinate responses during proxy season.

• Clawbacks

Another safeguard widely gaining prominence is the
“clawback” provision, in which deferred compensation is forfeited—or previously paid compensation is recovered— on a variety of grounds. Traditional clawbacks, or “bad boy” provisions, forfeited an executive’s stock options, unvested stock, or in some cases severance payments in the event of misconduct such as violating noncompete clauses or ethics codes. Following the accounting scandals earlier this decade, and in order to prevent managers from extracting undue rents through the manipulation of financial statements, Sarbanes-
Oxley was written to include a tougher clawback provision,
Section 304, that allowed the return of the prior year’s CEO and CFO bonuses in the event of a financial accounting restatement that resulted from noncompliance with reporting requirements due to “misconduct.”39 The SEC announced its first individual Section 304 settlement in 2007, for a recordbreaking
$468 million in bonuses, profits, and penalties, due to options backdating by William McGuire, the former chairman and CEO of UnitedHealthGroup, Inc.40 American publicly owned firms have been introducing their own clawback provisions in increasing numbers. In a 2008 survey by The Corporate Library, 329 of the 2,100 businesses surveyed adopted clawbacks for financial misstatements, compared to just 14 of 1800 firms surveyed in 2003. Fortyfour percent of the provisions are “fraud-based,” triggered if the executive engaged in misconduct causing a restatement.
And 39 percent are “performance-based,” a stronger form in which all executives’ incentive payouts are returned if they are based on incorrect financials.41 The adoption of these clawback policies comes as financial restatement rates in the
United States plummet. A study from Glass, Lewis & Co. LLC found that in the first quarter of 2008, there were 21 percent fewer restatements than the same period in 2007.42 Though correlation has not been effectively studied, improved financial accounting and auditing systems mandated by Sarbanes-
Oxley, combined with the extra security of these clawback policies, may have been effective at reducing the incentive to misstate earnings in order to maximize compensation payouts.
But today’s clamor regarding excessive executive compensation is generally not in response to accounting fraud. Rather, outrage is directed at firms, particularly in the financial industry, in which gargantuan incentive bonus schemes are not, in fact, tied to long-term firm performance, or which may have only upside potential, with no downside risk. Professor Raghuram Rajan, of the University of Chicago
Business School, describes Wall Street’s compensation design problem in terms of huge annual bonuses that encourage the creation of “fake alpha,” or excess returns that are based on huge, hidden tail risks.43 True alpha, or excess investment returns without additional risk, is a rare find, often only in the hands of extremely talented individuals
(such as Warren Buffet), so fake alpha is a great temptation for lesser performers. And so long as bonuses are handed out annually without any downside potential, traders and managers are incentivized to chase fake alpha, in the hope that the investment does not implode until after the bonuses have been paid out. Rajan uses the example of AAA-rated collateralized debt obligations (CDOs), which generated
50–60 bps higher return than similarly rated corporate debt.
The traders who created these CDOs were remunerated for these excess returns, without regard for the fact that these excess returns came with the tail-risk of CDO default.
Rajan’s approach to discourage the pursuit of fake alpha is a strict clawback for traders and managers, triggered not by financial restatements, but by poor financial performance of the assets under their control. A portion of the individual’s bonus would be kept in escrow until the tail risk had passed, so that only true alpha is rewarded.44 One well-known example of this type of individual-performance clawback was the remuneration policy at the Harvard Management Company.
Portfolio managers were paid a base salary, a “neutral” bonus, and an incentive bonus. The incentive bonus could be positive or negative, depending on the portfolio’s return, and large portions were carried forward and reinvested in the portfolio until the following year, rather than paid out immediately. If the fund performed below a certain benchmark the following year, those withheld bonuses were clawed back, and thus downside risk and upside potential were matched, both shortand long-term.45 While the Harvard Management Company generated famously high returns, enough to fund one-third of Harvard
University’s operating expenses annually, the effectiveness of the firm’s remuneration policy is questionable. Recent evidence indicates that even this sophisticated clawback policy could not prevent the portfolio managers from taking on excessive risk. The fund lost $8.1 billion from July 1, 2008 to October 31, 2008, and was at that time, still pursuing shocking bubble-era investments in commodities such as oil, lumber, and land, while holding a tiny fraction of conventional investments and safer fixed-income and low-risk vehicles.46
In sum, regulatory controls on executive compensation often follow a groundswell of public dissatisfaction, and historically in the United States, they have been largely ineffective. In the Appendix, we provide a full review of the current and proposed changes that have followed the recent subprime mortgage crisis, including the rules put in place for TARP recipients, and the SEC’s proposals for all American publicly owned companies. With uneven success of these regulatory approaches, the merits of US government efforts put in place since 2008 remain in doubt.

Similar Documents

Premium Essay

Executive Compensation

...Executive Compensation: Do you get what you pay for? Some would say that top executives are not overpaid. This side of the argument is based on the premise that top executives are paid well, but not overpaid. Many people see CEO pay packages but do not look further to see that a CEO's pay is not the whole story. What are the factors that might support a high executive compensation package? It is usually the most extreme cases of overpay that hit the press. Proponents of the argument that top executives are not overpaid state that most of the complaints about executive compensation center around extreme cases of overpay, and such cases blind us to the fact that the majority of executives are paid fairly. One example of this is the case of Lee Raymond, former head of Exxon Mobile. When he retired from the company in 2006, the price of gasoline at the pump was high, $3 per gallon, much to the consternation of consumers. Yet Exxon Mobile rewarded Raymond with a record retirement package--a "golden parachute," as it is known--to the tune of $400 million. The combination of exorbitant CEO pay and painfully high gas prices rubbed most observers the wrong way. A similar situation occurred in the case of Robert Nardelli of Home Depot. When Nardelli retired in 2007 with a pay package worth $210 million, the company he headed had just gone through several straight years of relatively poor performance. People wanted to know why the chief executive received such an exceptional payout...

Words: 2679 - Pages: 11

Premium Essay

Executive Compensation

...Executive Pay Strategic Issues and Problems: As a result of the current economic crises, many companies are experiencing massive financial losses. These companies are reducing salaries and cutting peoples’ jobs while executives are maintaining high compensations. Using tax payer’s money, the US Government is assisting these financially struggling companies through the Troubled Asset Relief Program (TARP). TARP was created to assist these companies to ultimately allow them to survive and prevent massive job loss. Tax payers are concerned about executives receiving a high and unjust compensation in comparison to other non-executives whom are suffering from layoffs and compensation cuts. Executive compensation is controlled by the companies’ boards that in turn work under the Chief Executives. The US Government is intervening by proposing plans to regulate the compensation of executives in these financially stressed companies. Evaluation and Analysis: Compensation of executives is not regulated or monitored effectively. Executives have the ability to use deceptive and manipulative practices to achieve higher unjust compensations. Boards justify the high compensations as rewarding performance, which is contradicting considering the financial status of these companies. People are becoming outraged as many are losing their jobs and are receiving salary reductions while executives are still making millions. The US government is imposing executive compensation regulations to...

Words: 666 - Pages: 3

Premium Essay

Executive Compensation

...Session 9 Samstag, 6. September 2014 13:30 Session 9 Prep Topic: CEO compensation Reading • Résumé Pedro Matos, Darden Professor • Chapter 7 in Corporate Governance • Chapter 7 in Boards That Deliver • Bargain Bosses, American chief executives are not overpaid, The Economist • How to get paid like a U.S. CEO, Fortune • Executive Compensation Corporate Governance: Chapter 7 - CEO Compensation • Norms for CEO compensation ○ Proxy statements provide information on executive compensation and are distributed ahead of shareholder meetings ○ There is a positive correlation between firm size and total CEO compensation ○ The higher the CEO total compensation, the larger the percentage of non-cash compensation (bonus) • The Goal of executive compensation • What is good performance? ○ Current circumstances, its goals and the execution of its strategies ○ Compensation should include short- and long-term plans ○ Long-term: achieving strategic goals (e.g. financial) ○ Compensation/performance should be benchmarked against peers • Building a compensation plan ○ Peer comparison is the beginning, but should not be the only determinant of CEO compensation ○ Gradual rise of CEO compensation is due to the matching with competitive compensation as soon as one competitor increases compensation • Compensation mix ○ Base salary  Have average base salaries with at-risk copmensation when performance is superior ○ Fringe Benefits  30-50% of base salary  Medical and life insurance premiums,...

Words: 822 - Pages: 4

Free Essay

Executive Compensation

...Regulation of Executive Compensation and its impact on the stability of the financial system | | Introduction In corporate circles, the financial crisis and its effect on companies is sometimes illustrated as a systematic phenomenon in which there is no individual responsibility. Public discussion, on the contrary often assigns the blame of the crisis to bankers or managers, and suggests conclusions of salary reductions or individual liability in terms of losses. In this paper the implications of executive compensation surrounding the financial crisis will be debated. Firstly, the types of executive compensation will be discussed and the implications of them. Secondly, how executive compensation contributed to the financial crisis will be conferred and thirdly the legal improvements and current process will be analysed. To aid understanding, articles and examples will be used to emphasise the various views of economists regarding executive compensation. Non-Regulation of Executive Compensation Executive Compensation can be described as the monetary bonus, or the non-monetary benefits which an executive receives for their work in an organisation. Executive Compensation can be a highly motivating incentive to work more efficiently, thus benefiting the organisation and keeping the executive content with his contribution and performance. However, this compensation can have adverse effects where the executive does not have the organisations best interest in mind, but...

Words: 2530 - Pages: 11

Premium Essay

Executive Compensation

...EXECUTIVE COMPENSATION 1. HOW IS IT DETERMINED? Executive compensation generally consists of a mix of four components: - Annual Base Salary - Annual Incentive or bonus plans tied to short-term performance measures. - Long Term Incentives consisting in a mix of restricted stocks, stocks options and other long-term performance plans tied to shareholder return or financial performance. - Benefits plans. As a rule of thumb, the base salary constitutes 30% of total compensation, the annual incentive another 20%, the benefits about 10% and long-term incentives or the wealth creation portion of the compensation about 40%. Indeed, before the financial crisis, there was a lot of board attention to improving the relationship between pay and performance. As boards sought to achieve pay for performance, one outcome of the trend was to place more emphasis on performance vested restricted stock for the top executives. Thus, an increased portion of executive compensation was primarily tied to what, in the long term, most institutional investors tend to focus on: long-term performance as measured by total shareholder return or performance metrics that drive shareholder return. 2. SHOULD EXECUTIVES RECIVE STOCKS OPTIONS? Supporters of stock options say they align the interests of CEOs to those of shareholders, since options are valuable only if the stock price remains above the option's strike price. Stock options are now counted as a corporate expense (non-cash), which impacts a...

Words: 977 - Pages: 4

Premium Essay

Corporate Governsance(Executive Compensation)

...An Assessment of Executive Compensation in Switzerland With Reference to Referendum in March 2013 on Executive Pay Adamu Yushau Usumanu adamuusumanu@gmail.com This Paper is Submitted in Partial Fulfillment of the requirement for Corporate Finance and Governance course SMC University School of Management Dr. Albert Widman January 29 , 2014 Abstract The citizens of Switzerland in March 2013, decided in a referendum that shareholders must determine Board Member, Chairmen and Executive pay. They also decided to restrict proxy voting and ban severance pay, bonuses, for the purchase and sale of companies. In addition, loans pensions, and remuneration in he form of stocks or profit sharing must be regulated by the bylaws of the company, and finally, individual board members, and chairmen be elected by shareholder every year and banned corporate proxy and the representation of shareholders by depository bank. Key Words: Corporate Governance, Executive Compensation, Referendum, Board Introduction The executive compensation (executive pay) is composed of the financial compensation and other non-financial awards received by an executive of a firm. It is a mixture of salary, bonuses, shares of and/or call option on the company stock, benefits, and perquisites, ideally configured to take into account government regulation, tax law, the desires of...

Words: 2829 - Pages: 12

Free Essay

Executive Compensation

...Case Report on Executive Compensation In the modern society, chief executive officer has become the most important part to many companies especially to the publicly listed corporations. They generally make a significant contribution to the profitability of their firm. However, in some case the managers’ interests conflict with their companies’, and thus their decisions may probably do not maximize their companies’ value. Therefore, it is a problem that how shareholders ensure that top executives want to maximize their wealth. This paper explores the principle for compensation, makes an attempt to design a new compensation package to the chief executive officer of Nike, Inc., and finally compare the different between the existing pay package and the new one. I. Introduction Nike, which originally named as Blue Ribbon Sports, is the largest manufacturer of the athletic footwear and apparel in the world, and one of the Fortune 500 companies. Figure1 shows that Nike is the leader of the global athletic footwear market, with around 31% market share in 2007. Creating by Bill Bowerman and Philip Knight in 1962, its early products are footwear, but now it has a wide range of product line. Today Nike is engaged in design, development and marketing of footwear, apparel and equipment, including shoes, sock, gloves, bags, and sports balls and so on. Many of its products are design for specific athletic such as football, basketball, running and even walking. According to figure2,...

Words: 1788 - Pages: 8

Free Essay

Executive Compensation

...ARE TOP EXECUTVES WORTH WHAT THEY ARE PAID? Introduction “Republic Bank Executives getting million$- Workers Getting Crumbs!!”- This is at a time when Bank Directors fees are increased by 85 percent to nearly 1 million dollars in one year alone (Trinidad Guardian, February 25,2011). “While Republic Bank Biggies could look forward to a bigger parting gift than $10 Million and FATTER PENSION(BIGGER BANK/BIGGEST PROFITS=BIGGER GIFT/FATTEST PENSION) , a republic bank worker after 30 years service gets an average MONTHLY PENSION OF $2,400.00 and a pat on the back.” It is headlines like the one stated above that continues to bombard the media in recent times. Executive remuneration is one of the most hotly debated topics in the Human Resource (HR) world. Bergmann and Scapello (2002) argue that during the reign of Julius Caesar, centurions received attractive incentives. However, they stressed that longevity of an idea does not mean a lack of controversy surrounding it. In the aftermath of the financial crash and recession 2007-2009, the debate of the executive compensation again has surfaced to the forefront by the media and became the hot issue for academicians, researchers, regulators, policy makers and public. The purpose of this paper is to clearly discuss the issue of executive compensation by presenting arguments for and against it. While there has been an undisputed escalation in Chief Executive Officers (CEOs) pay and in comparison to the earnings of “average” workers...

Words: 1438 - Pages: 6

Premium Essay

The Management of Executive Compensation

...THE MANAGEMENT OF EXECUTIVE COMPENSATION Posted on November 16, 2011 1 EXECUTIVE COMPENSATION Notes on THE MANAGEMENT OF EXECUTIVE COMPENSATION….. Executive compensation is the total remuneration or financial compensation a top executive receives within an organization. This includes a basic salary, any and all bonuses, shares options, and any other company benefit. Over the past three decades, executive compensation has risen dramatically beyond the rising levels of an average worker’s wage. Executive compensation is an important part of corporate governance, and is often determined by a company’s board of directors. Executive compensation is a very important thing to consider when evaluating an investment opportunity. Executives who are improperly compensated may not have the incentive to perform in the best interest of shareholders, which can be costly for those shareholders. While new laws and regulations have made executive compensation much clearer in company filings, many investors remain clueless as to how to find and read these critical reports. This article will take a look at the different types of executive compensation and how investors can find and evaluate compensation information. WHO IS AN EXECUTIVE? A person or group having administrative or managerial authority in an organisation. The chief officer of a government, state or political division. Chief executive officer (CEO), one of the highest-ranking corporate officers (executives) or administrators...

Words: 2251 - Pages: 10

Premium Essay

What’s Wrong with Executive Compensation?

...Journal of Business Ethics (2009) 85:147–156 DOI 10.1007/s10551-008-9934-6 Ó Springer 2008 What’s Wrong with Executive Compensation? Jared D. Harris ABSTRACT. I broadly explore the question by examining several common criticisms of CEO pay through both philosophical and empirical lenses. While some criticisms appear to be unfounded, the analysis shows not only that current compensation practices are problematic both from the standpoint of distributive justice and fairness, but also that incentive pay ultimately exacerbates the very agency problem it is purported to solve. KEY WORDS: executive compensation, distributive justice, pay disparity, incentive alignment Introduction Few academic theories have been adopted as widely as the application of agency theory (Jensen and Meckling, 1976) to the structure of executive pay in modern corporations. After prominent suggestions that the inherent conflict of interest that exists between stockholders and corporate managers – or ‘agency problem’ – could be mitigated through the structure of managerial incentives (e.g., Jensen and Murphy, 1990a), the prevalence and size of stock option grants to senior executives have expanded increasingly and substantially (Hall and Murphy, Jared D. Harris, Assistant Professor teaches both Ethics and Strategy courses in Darden’s MBA program, and a doctoral seminar on corporate governance and ethics. His research centers on the interplay between ethics and strategy, with a particular focus...

Words: 6653 - Pages: 27

Free Essay

Analysis of Compensation Between Workers and Executives.

...1. Executive Summary The positive economic growth recorded since 1994 by the new democratic South Africa is tainted by the widening wage gap between executives and average workers. This has made South Africa one of the most unequal countries in the world. Average Chief Executive Officer (CEO) remuneration increased by 11.5% a year from 2006 to 2009. An average worker would take 8 years to earn what a CEO earns in a 3 month period (Theuissen, 2010). Globalisation, company acquisitions and mergers make businesses more complex and challenging to manage. Companies seek to recruit the best managers who demand higher pay (Templetion, 2007). The involvement of the compensation committee in the setting of the CEOs remuneration may contribute to the higher pay for executives (Reh, 200- ). South Africa has a high level of low skilled labour. Skilled workers are in high demand to drive economic growth. Also, as technology continues to advance, more skilled workers are recruited to operate the high tech machines and they demand higher wages (Sill, 2002). The low wage paid to average workers and the large gap between executive compensation and average workers can have negative emotional effects. It also creates tension between employers and employees which may result in external reactions (Mc Clelland, 2008). Creation of value framework for the remuneration of executives and improved wage structures for the average worker will help narrow the existing wage gap (ASA, 2010). 2. Introduction...

Words: 4012 - Pages: 17

Premium Essay

Executive Compensation: the Ethical and Impact Challenge

...Executive Compensation: The Ethical and Impact Challenge                    Executive Compensation: The Ethical and Impact Challenge Executive compensation is defined as the reward given to corporate executive employees for their job performance. Corporate executive employees are the higher echelon company employees and may include the chief financial officers, chief executive officer, upper level managers and the company president. Executive compensation mostly consists of base salary, bonuses, long-term incentives benefits, and prerequisites whose main purpose is to motivate the executives to steer the company to profitability and make decisions with the best interest of the organization. Executive compensation has been on an upward rise especially within the last few decades reaching to unprecedented levels. Worse still, executive employees’ salaries and benefits have increased at a significantly higher rate as compared to other employee’s compensation consequently raising controversy not only of the ethical issues but on issues of equity and efficacy of the high compensation in motivating the executive’s performance. The paper thus posits that the increased executive salaries are not only unethical but are not a reflection of executive performance nor are they correlated to executives performance and as such other options of motivating...

Words: 1620 - Pages: 7

Premium Essay

Executive Compensation

...C. Lindsay Executive Compensation Legal & Ethical Issues In Management (MGT 623) Oct. 27, 2012 Executive compensation a very controversial matter, and there are plenty of mixed feelings about it, but according to the ethics tool kit, it can be analyzed in two different way; freedom and responsibility. If a person is the CEO of a company, and that company belongs to him/her, he/she should have the freedom to give money when they want, take money when they want, and grant bonuses. The issue here is that that is not always the ethical approach. A company is run by its employees, but according to the Halbert and Ingulli, the trend in big companies has been to grant executives with more money and give their employees the bare minimum. As an executive/CEO of a company one of your main goals should be to make sure that your employees are happy, simply because a happy employee is more productive, and production boosts sales. It is the companies responsibility to keep their employees happy, and the best way to do that is to give them more money. It makes them feel like that are really making a difference in the company, and it lets them know that all of their hard work is not being done in vain. Milton Friedman is a supporter of freedom in corporations, but he also believes that, “it is wrong for managers to use corporate resources to deal with problems in society at large,” (Halbert & Ingulli 2012). Friedman also said that for managers to make the decision to use corporate...

Words: 674 - Pages: 3

Premium Essay

Us Auto Industry Back on Top

...Management February 11, 2015 INTRODUCTION Executive compensation has been at the forefront of discussion for a long period of time. Analyzed by academics, highlighted by the media, questioned by Congress, and scrutinized by the general public, the topic warrants much debate. In the 1990’s, total executive compensation increased substantially as companies began offering stock option programs; CEO’s of S&P 500 saw an average increase of 150%. While many top U.S. executives continued to receive enormous compensation options throughout the economic downturns of 2001 and 2008, none was more apparent than those in the automotive industry. While the big three, comprising of General Motors, Ford and Chrysler, were facing insurmountable debt and possibly bankruptcy, top executives were receiving some of the highest reparations ever experienced by directors of the companies. The case study presented in Managing Human Resources, Sixteenth Edition by Snell and Bohlander brings to mind the fact that during 2011, Ford CEO, Alan Mulally, received $53.5 million in stock awards. Many discussions can be derived from this statement. However, a basic understanding of modern corporate compensation structures must first be realized. Along with understanding these compensation structures, knowledge of the views on economic rent and optimal contracting must also be developed. Corporate Compensation Structures Corporate compensation structures have changed drastically within the past...

Words: 1665 - Pages: 7

Premium Essay

Phone Industry in Bangladesh

...Total Compensation and Benefits Package of UCBL Salary Structure Refer to the Salary & Remuneration Package Structure for Supervisors and Executive Staff of UCBL for details regarding the structure of salary and allowances for different units under UCBL Revision of Pay Elements The compensation structure may be revised, if necessary, with the approval of the Director, Admin/HR, and Head of the Dept., Finance and the Chief Executive. Employee Compensation Records Employee Pay Records are maintained by the Personnel & Admin Department for Workers and Supervisors and by the Human Resource Department for the Executives. These departments maintain personal file of all employees where all records in regards to the employee are kept in addition to any soft copy (in computer database) maintained by the departments. These records are confidential and should not be accessible to any unauthorized persons (authorization defined by HR or Personnel &Admin dept. head). Basic Employee Benefits for Permanent Employees Provident Fund The Company's Provident Fund is a funded scheme. All confirmed and permanent employees are entitled to be members of the Provident Fund. The employee contribution, equal to 10% of the basic salary, is deducted each month through the payroll. The Company's Provident Fund is a funded scheme. All long-established and enduring employees are at liberty to be members of the Provident Fund. In the Provident Fund Ledger, both the employee's and...

Words: 922 - Pages: 4