Premium Essay

Executive Compensation: the Ethical and Impact Challenge

In: Business and Management

Submitted By MARidgeway
Words 1620
Pages 7
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 executive employees should be explored. Other employee motivations such as through psychological contract, organization motivation and employee development should be sought especially with the increased use of teams in management in volatile environment.
Types of executive compensation Executive compensation consists of the base salary, bonuses, and long-term-incentives such as...

Similar Documents

Free Essay

Chapter 2 Outline

...LECTURE OUTLINE I. Stakeholders Define Ethical Issues in Business A. Stakeholders In a business context, customers, investors and shareholders, employees, suppliers, government agencies, communities, and others who have a “stake” or claim in some aspect of a company’s products, operations, markets, industry, and outcomes are known as stakeholders. 1. Stakeholders are influenced by business, but they also have the ability to affect businesses. 2. They apply their values and standards to many diverse issues—for example, working conditions, consumer rights, environmental conservation, product safety, and proper information disclosure—which may or may not directly affect an individual stakeholder’s own welfare. 3. They provide both tangible and intangible resources that are more or less critical to a firm’s long-term success. 4. Individual stakeholders that share similar expectations about desirable business conduct may choose to establish or join formal communities to advocate their values and expectations. 5. Stakeholders’ ability to withdraw—or to threaten to withdraw—valuable needed resources gives them power over businesses. B. Identifying Stakeholders 1. Stakeholders can be divided into two categories. a) Primary stakeholders are those whose continued association is absolutely necessary for a firm’s survival; these include employees, customers, investors, and stockholders, as well as the governments...

Words: 1579 - Pages: 7

Premium Essay

The Price of Unethical Behavior

...Unethical Behavior The Price of Unethical Behavior The purpose of this paper is to evaluate unethical behavior of Tyco International executives and chairman by briefly summarizing the company’s historical scenario, the spending habits and loans made for those executives, the resulting outcome of the events, the punishment handed down from indictments and whether it was justified. In 1975 Dennis Kozlowski joined Tyco International and in 1992 was named the chairman and chief executive. Through the late 1990s, Kozlowski facilitated Tyco’s expansion. During Kozlowski’s last three years with Tyco he made at least $300 million and was noted as being one of the highest paid executives in the United States. During his tenure at Tyco Kozlowski acquired almost $500 million along with a $31 million dollar New York apartment and several rare paintings, which came under scrutiny by both federal prosecutors and the company. With Kozlowski as chief executive officer he made Tyco into a giant conglomerate mainly through acquisitions. Tyco has two major segments; fire protection systems and security systems is incorporated in Switzerland and has operational headquarters in Princeton, New Jersey. At its peak, Tyco had a market value over $100 billion. In 2002 Kozlowski left Tyco over a issue regarding the misuse of company funds and his hefty compensation package. Shortly after leaving Tyco, Kozlowski was indicted on charges of evading more than $1 million of sales taxes on six......

Words: 1396 - Pages: 6

Premium Essay

Toshiba

...accounting irregularities at Toshiba, so an independent panel was put in place to investigate the watchdog’s claims. In April, Toshiba made public that it was going to restate its profit for fiscal years 2011 through 2013 by at least ¥50B (or $419M) due to accounting irregularities at three units of the company (Power System, Social Infrastructure System and Community Solutions). In July 2015, the independent panel indicated that Toshiba overstated its profits by ¥150B ($1.2B), primarily in its electric power systems business from fiscal years 2009 through fiscal year 2013, plus additional irregularities in Toshiba’s personal computer and semiconductor business. The findings forced Toshiba’s Corp. President Hisao Tanaka and several other executives to step down in July. The accounting scheme may have started around 2008 during the global financial crisis, but it is believed that it deepened after Japan’s March 2011 earthquake, tsunami and nuclear disasters because Toshiba supplied two of the reactors affected at the Fukushima Daiichi plant. After this event, Japan shut down the remainder of the nuclear operations at the site, and the demand for nuclear energy around the world was reduced. Toshiba, having a large stake of its business in the nuclear energy production, became affected by the events in 2011, so management at Toshiba set aggressive sales and profit targets across the company to offset the decline in the energy division. As a result of this decision, the......

Words: 1725 - Pages: 7

Premium Essay

Examining a Business Failure

...Organizational behavior is defined as the study of the behavior of individuals, groups and structure and the impact to an organization. Organizational behavior uses the information gathered from this study to improve the organization’s effectiveness (Robbins, 2011). Organizational behavior focuses on a number of areas including the behavior of leaders, inter-personal communication, processes and structure within the organization, conflict and employee motivation. The behavioral disciplines of psychology, social psychology, sociology and anthropology form the basis for the study of organizational behavior. Psychology and social psychology studies the impact of conditions in the workplace and the impact to the employees’ performance. Within these sciences, learning theorists also studies the impact of change and how to reduce the challenges of change in the work environment [ (Robbins, 2011, p. 12) ]. According to the authors, sociology, and anthropology contributes to the study of organizational behavior by focusing on the relationship of employees as a group and the impact to the organizational structure. The culture and group dynamic of the employees will direct the level of motivation that in turn will negatively or positively impact the performance of the organization [ (Robbins, 2011, p. 12) ]. Psychology evaluates changes in individuals’ behavior and the impact to learning, Emotions, leadership, and decision-making processes in an organization. Social......

Words: 1292 - Pages: 6

Premium Essay

Climate Changes

...Executive Summary Global climate has changed throughout the last century and it is causing human suffering around the world, but the global warming issue was only brought to the forefront politically in 2010, when the Village of Kivalina was affected by the Gulf Oil Spill accident, and became uninhabitable. According to Saundra Brown Armstrong, a senior United States federal judge, human activity is the major factor increasing global warming. Factors such as greenhouse gas emission, pollution from factory smokestacks, landfills, and oil spills are the main causes that contribute to a potential catastrophe. Even after it was demonstrated that global warming was caused by human activity, the United States remains the only developed country that has not signed the Kyoto Protocol contesting that it would have a ruinous effect on its weak economy. Instead of signing the Kyoto Protocol, the United States Congress opted to create their own Environmental Protection Statues of global warming policy on climate to reduce greenhouse gas emissions, and it had impacted to ethics in business environment and political issue. However, the public opinion has asked for more effective actions and this may soon push the U.S. into a global leadership position on global warming. In conclusion, all of those issues obligated the Environmental Justice to stand in order to protect human being and the environment integrity considering the climate responsibility...

Words: 1018 - Pages: 5

Premium Essay

What

...AFT3073 – RESEARCH METHODOLOGY |GROUP ASSIGNMENT (25%) – RESEARCH TERM PAPER TOPICS | |Current Strategic Management Issues | |This course assignment is a term paper on current strategic management issues. Possible themes/issues for your research term paper | |include (but are not limited to) the following: | |Ethics and Corporate Citizenship Themes | |Understandings of corporate citizenship | |Links between ethics and corporate citizenship | |Performance measurement | |Accountability and governance | |Stakeholder engagement, consultation, reporting and governance | |Corporations, territory and governance ...

Words: 663 - Pages: 3

Premium Essay

Case Study in Ethics: Human Resources

...Case Study In Ethics: Human Resources In human resources, professionals face ethical decisions on an every day basis.   Many times, these involve issues that conflict with company policies and procedures or what they think is morally correct.   With this said, the board of directors or management may desire to change the way a company is ran and change employee benefits to achieve an organizational objective that may create an ethical issue. This is why it is the responsibility of HR professionals to make ethical decisions and provide guidance to the entire organization.   The human resource department is usually considered as specialists that are involved in training, compensation, and employee benefits (Society for Human Resource Management, 2008).  It has only been recently that organizations have begun relying on HR professionals to help guide and prepare their employees. This increased involvement helps the HR department monitor ethical actions of the employees. It enables them to see the actual challenges the organization may face and helps them to provide ethical solutions to fix them. With this case study, the board of directors want to save money by “taking away” from the employees. XYZ Company is a manufacturing company that recently went through an IPO when deciding to expand the business and move into a broader market (Thenor-Martin, 2013). When proposing the cost saving measures, Mary, the HR director, noticed they were on the extreme side. Management......

Words: 1220 - Pages: 5

Free Essay

Diversity Audit

...Table of Contents Executive Summary 2 About TimoTel 2 TimoTel & Supplier Diversity 3 Criteria and Methods 3 The Business Case for Diversity, its Challenges & Awareness 4 Diversity Challenges 5 Recommendations 5 References 7 Executive Summary A diverse workforce is more common today than it was decades ago, and is a challenge more companies are faced with today. Multi-generations are working side by side, learning from one another’s experiences. Immigration has increased from 979,000 to 1,120,000 in 2011 [census.gov], and the proportion of fforeign workers has grown as a result. Same sex unions are legal in some areas, women are working, etc. all leading to a more diverse work environment. TimoTel presently does not appear to have diversity as a focal area in long term business objectives, as you will find in the visions and values illustrated later, but it does place responsibility and accountability for the success of the company on its people. Diversity and diversity management are hardly taken into consideration and have to be developed yet. The TimoTel Officers is comprised of ten males (no females), eight of which are Caucasian; the Board of Directors also has ten members, of which eight are Caucasian males, and two females. About TimoTel TimoTel, a company whose beginning started in 1965, manufactures and designs telecommunications equipment for service providers (customers include wireline, wireless, cable TV companies and......

Words: 1435 - Pages: 6

Premium Essay

Business

...principles, values, and standards that guide behavior in the world of business 3. Principles: Specific boundaries for behavior that are universal and absolute Freedom of speech, civil liberties 4. Values: Used to develop socially enforced norms Integrity, accountability, trust, Norms: Accepted behaviors. Morals: Rules of right conduct: right/wrong 5. A Crisis in Business Ethics * Consumer trust of businesses is declining, No sector is exempt from ethical misconduct, Stakeholders determine what is ethical/unethical ,Investors Employees, Customers, Interest groups, Legal system, Community 6. Why Study Business Ethics? * Reports of unethical behavior are on the rise, Society’s evaluation of right or wrong affects its ability to achieve its business goals, Studying business ethics is a response to Sarbanes-Oxley, FSGO, and stakeholder demands for ethics initiatives, Individual ethics alone is not sufficient, Studying business ethics helps identify ethical issues to key stakeholders 7. A Timeline of Ethical and Socially Responsible Concerns * Environmental issue, Civil right issue, increased employee employer tension, changing work ethics and rising drug use 8. Before 1960: Ethics in Business * Theological discussions of ethics emerged Catholic social ethics included a concern for morality in business, workers’ rights and living wages * Protestants developed ethics courses in their seminaries and schools of theology The......

Words: 2345 - Pages: 10

Premium Essay

The Role of Education in Promoting Corporate Social Responsibility

...The role of education in promoting corporate social responsibility by The unsustainable depletion of natural resources, perception of poor health and imposition of dangerous working conditions are just some of the worrying external costs imposed by International commercial operations. These costs are borne especially by developing countries that do not receive adequate compensation from companies responsible for social and environmental damage, Lithuania is not an exception. The essence of corporate social responsibility (CSR) policy function is to monitor businesses and ensure its active compliance with the spirit of the law, ethical standards, and international norms. The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Recently, highly active consideration of CSR issues has reached Lithuania. Our developed neighbors experience provides an opportunity to practice CSR activities and present arguments in favor and counter against. However CSR policy does not offer a "one size fits all" solution, and it‘s because each country with different culture and different levels of morale, actions and behavior in business sector also got own style and tendencies of doing business. Also it is way harder to change established norms of persons who are running their own businesses in......

Words: 591 - Pages: 3

Premium Essay

Organizational Analysis

...CVS Caremark Organizational Analysis James P Miller Strayer University BUS 310 Professor Frevert Abstract CVS Caremark established 1963, has been expanding every year since their inception. With over 7,000 retail locations they face many human resources challenges. It essential for CVS to understand what HR challenges they face to make informed decisions; beneficial to the company stakeholders and employees. Hr decisions affect not only the employee’s but the company’s social opt squat. These resolutions include recruitment of highly skilled workers, company policies, labor relations, training and diversity, management of multiple locations, global business environments, employee compensation and benefits, and legal compliance. In addition, CVS human resources have to align optisquat with the mission and values of the company. CVS Caremark Organizational Analysis CVS Caremark is a pharmacy health care provider in the U.S. They provide pharmacy services, which includes mail order pharmacy services, specialty pharmacy services, plan design and administration, formulary management and claims processing; and Retail Pharmacy, which sells prescription drugs and a range of general merchandise, including over-the-counter drugs, beauty products and cosmetics, photo finishing, seasonal merchandise, greeting cards and convenience foods. As of Dec. 31, 2011, CVS has approximately 7,300 CVS/pharmacy retail stores. (CVS Care mark, 2011) ......

Words: 1715 - Pages: 7

Free Essay

The Business Ethic of Kfc and Mcdonald

...The Business ethic of KFC and McDonald TABLE OF CONTENTS The Business ethic of KFC and McDonald 1 Executive Summary 3 1 Introduction 3 2 Comparation of KFC and McDonald’s practices 4 3 Application of 4 relevant ethical theories 6 3.1 The utilitarian approach 6 3.2 The rights ethical approach 7 3.3 The Justice ethical approach 7 3.4 The virtue approach 8 Conclusion 8 References 9 Executive Summary A company has its responsibilities to its consumers, its suppliers, its employees , its shareholders as well as the local community and society in general .This article I choose KFC and McDonald’s which both are Food and Beverage industry to analyse the business ethics base on ethical theories . Business ethics means the application of ethical standards to the business behaviors . Business ethics has become an increasingly important part of this global conscience .(Freyne, 2009 ;Gilmartin, 2008) 1 Introduction Kentucky Fried Chicken ,as know as KFC, is the famous American chain fast food restaurant which was founded in 1952 by Colonel Harland Sanders .And He is also the logo of KFC . KFC is affiliated with Yum brands now and formed a strategic alliance with Pepsi , (some exceptions,......

Words: 1657 - Pages: 7

Premium Essay

Enron Collapse

...The Enron Collapse Enron, a high profile organization which ranked as the seventh largest company in the United States during the 1990’s consisted of approximately 25,000 employees worldwide and held revenues in the tune of over 100 billion dollars in 2000. Enron controlled about one quarter of the gas companies in the United States and also expanded into Myriad energy products during its years of operation. The company traded hundreds of products throughout the wider Continentals including South America, Asia, Europe, Australia and also the United States, and was considered to be very successful with their trading strategies. An excerpt from an article in the CRS Report for Congress entitled The Enron Collapse: An Overview of Financial Issues, Mark Jickling, (February 4, 2002), states that “the firm was widely regarded as one of the most innovative, fast growing, and best managed businesses in the United States.” However, despite all of Enron’s fame and glory, the company crumbled as a result of bad management and unethical practices. According to Donaldson & Werhane (2008), “The controls as designed were not rigorous enough and their implication and oversight was inadequate at both Management and Board levels,” (p. 313). The purpose of this paper is to discuss the Enron Collapse and explain how the virtuous manager would have responded to working for Enron. Also being discussed is what the virtuous manager is expected to do if confronted with these decisions. Unfolding...

Words: 1955 - Pages: 8

Premium Essay

Law 500

...Corporate Responsibility in the Workplace and the World The first category of stakeholders in this case are the executives and managers. Their consideration is that the business strongly relies on partners helping them in the provision of the best value products to their customers. Retailers become increasingly dependent on strong managerial relationships in providing the best quality products within their customers’ optimal price points. The second category of stakeholders are the Medicare, Medicaid, and VA patients. These are the main cutomers of PharmaCARE. They are mainly interested in quality customer service as well as top-range products to address their needs (Jennings, 2010). For this reason, they are attracted to PharmaCARE as it continues to prove nbeaten in its advertisements. Further, the workers form the third grouping of the stakeholders. These category form’s PharmaCARE’s human resource and are very instrumental in the production and daily running of the organization. Their major interest is improved working conditions which, currently, PharmaCARE has shown no concern over. There is a high rate of absenteesm due to frequent sicknesses whichtally down to the break down of the ventilation system. The compounding pharmacies who are also categorized as PharmaCARE’s competitors are the other group. Under this, ethical responsibility to all their customers as well as giving back to the community through charitable donations and active......

Words: 1748 - Pages: 7

Premium Essay

Role and Functions of Law Paper

...can and cannot do.” Roles of law are classified in three areas, civil and criminal laws, substantive and procedural laws, and public and private laws. Civil laws are designed to compensate both society and business for losses or damages as a result of another’s conduct (Melvin, 2011). According to Melvin, 2011, “Criminal laws are for the protection of both society and business. Violation of criminal laws can result in the form of penalties such as fines or imprisonment, or both. Substantive laws provide individuals with rights and create certain duties while procedural laws provide a structure and set out rules for pursuing substantive rights.” Public laws are those formed from some government entity, including statutes legislative and executive, and administrative (Melvin, 2011). Private laws are recognized as binding between two parties even though no specific statute or regulation provides for the rights of the parties (Melvin, 2011). According to Melvin, 2011,...

Words: 903 - Pages: 4