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Ceo Pay in the News

In: Business and Management

Submitted By CT105
Words 914
Pages 4
1. What additional information about the CEO’s pay package should Don identify to potentially share with the employees?
2. How can Don explain the pay disparity to the employees to ease their concerns about the fairness of the CEO’s pay?
3. Discuss the six forms of deferred (stock) compensation.
4. Briefly discuss the current core compensation and employee benefits of executive compensation.

SOLUTION

1. Executive pay is comprised of several different components and Don should outline those specifically. Depending on the theory used to set the CEO’s pay, Don may want to collect different information. For example, under agency theory, he may want to emphasize the CEO’s ownership in the company. Under social comparison, he may want to obtain information on the market rates of CEO pay in Oakwood’s industry. Further, Don should identify the components of the CEO’s salary that are specifically tied to performance. While the company is having financial difficulty, Don should identify performance data that indicates any success that CEO has had in leading the company. The case may be that while the company is struggling financially, without the leadership of the CEO, they could be doing much worse.

2. Students may have a variety of responses to this question. Essentially, they should identify the type of information that they would want to know if they were employees of Oakwood. For example, Don should emphasize the tie between the CEO’s pay and company performance. If the CEO’s pay will be reduced due to the financial difficulties, this should be highlighted. Further, Don must explain why the high pay level is needed to retain the skills and expertise of the CEO. If such expertise is rare, and particularly if the CEO is helped move the company forward, this information should be shared

3. Incentive stock options provide executives with the

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