Executive compensation generally has been unregulated. Often it is not appropria

Question

Executive compensation generally has been unregulated. Often it is not appropriately linked to factual performance measures (e.g. as discussed in the video “bogus” bonuses), and it has led to behaviors detrimental to society. Furthermore, the owners of public firms, that is, the stockholders, often have little control over compensation of executives (e.g. Michael Eisner and Michael Ovitz). How might society ensure that executive compensation is fair for all stakeholders? Is a shareholder vote on compensation sufficient? (max one page answer)

http://www.pbs.org/now/shows/505/index.html

Explanation / Answer

The bonus compensation should be a clean and transparent process, every member of the organization who is eligible for bonuses needs to have the parameters on how the bonus is going to be calculated.

This is a job of HR and higher management to provide the information about how the bonus will be calculated.

The most important part is that everyone involved must adhere to the established parameters, if you did great on the year and you earn a bonus of $100,000 that is great but if you didn’t achieve the goals of the year it is not fair that the company rewards you with 1 million dollars.

The process must be the same for every for this system to work, there can’t not be any shortcuts.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.