Executive Compensation

655 Words3 Pages
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…show more content…
Share holders will be more involved in the management of these companies. As Shareholders are the real “owners” of these companies, their interests would be to insure that management operates to the benefit of the company which they can accomplish by closely monitoring management. On the contrary, shareholders may be too profit and performance orientated. This may repel talented management as underperforming companies may leave executives with unfair compensation. 2- Government Intervention – Salary Caps and incentivize restrictive stock: Capping executive salary to a fixed amount then further compensating them with restrictive stock which they cannot sell for a specific period of time. A salary cap will drive executives’ interest to increase stock value and return. Restricting selling of the restrictive stock to a specific amount of years will prevent executives from immediately selling the stocks and prioritize their focus to the benefit of the company. Again this may fend off talented executives who are not satisfied by the compensation scheme. Unfavorably, the idea of government intervention in a free-market economy will open doors to massive controversies and criticisms. 3- Government Intervention – Increase ban on golden parachutes and implement Clawbacks on deceptive practices: Banning more executives from golden parachutes will insure executive
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