Stock Options-Acc 499 Capstone

d. ASC 710-10-25-9 addresses the recognition of deferred compensation arrangements. It states: “To the extent the terms of a contract attribute all or a portion of the expected future benefits to a period of service greater than one year, the cost of those benefits shall be accrued over that period of the employee’s service in a systematic and rational manner.” The compensation costs associated with the stock options should be allocated over the three-year reporting period.

10 states that an entity shall account for compensation cost from share-based payment transactions with employees in accordance with the fair-value-based method. Under the fair-value-based method, the cost of services received from employees in exchange for awards of share-based compensation shall be measured based on the grant-date fair value of the equity instruments issued. A10-A17 discuss the acceptable methods of calculating fair value at the grant date. The grant-date fair value of the Murray options is $6. Following the guidance in Illustration 4(a), Share Options with Cliff Vesting, of FAS 123(R), compensation expense for the years ended December 31, 2006 & 2007 is $200,000 per year (calculation attached hereto).

The amount of money executives receives in compensation is a concern of many people who disagree and have opposing views. The average worker believes it is a prime example of inequality of income and the status quo divide between the rich and the poor. The executive pay is high, the average worker pay is low, and the average family income has gone down. Only in situations when companies receive financial assistance from the government to help save their business from financial distress, the government should react in a way where they can protect taxpayers. While executives receive millions in bonuses, high paying salaries and perks of all kinds, millions of people are living in poverty, losing their homes and jobs. Even people on unemployment

We believe giving executive compensation with the financial support bestowed from the government during the economic crisis is unethical as they are aimed to support the companies from facing bankruptcy or from financial struggles they are currently facing. The stakeholders involved in this financial crisis were the chief executive officers of the major banks, the investors who invested into the companies, those who bought CDOs and other “garbage”, and ultimately the taxpayers whose money were used to relieve the major banks from going into bankruptcy.

There is currently a large wage gap between CEO’s of a company and the regular workers. Companies are not investing their profits in better technology or hiring new employees. This is having a profound negative effect on our economy and creating greater social inequality in our country. So far, strikes and protests by workers have had no effect on corporate compensation practices. Economic prosperity does not trickle down from the wealthy to the lower and middle classes. People need to rally and have their representative pass legislation that will cap executive salaries and increase minimum wage.

sation is only one of a number of corporate governance issues that companies now face, we need to consider how to foster greater accountability by removing impediments to the market for the transfer of corporate control. We 've made it harder for shareholders to join together and shift control of a company by supporting tender offers from outsiders-outsiders who may be able to deliver stronger performance. That, I think, has made the market less efficient than it was 20 years ago. This issue needs more study, but I believe part ofthe overall answer on executive compensation is to restore a greater liquidity in the market for corporate control. Peter Clapman: I hope the new stock-exchange requirements help change things, but I 'm not counting on it. We 're talking about a closed-door process that happens at board meetings, and I don 't think we can count on real progress until we 're able to influence the private discussions that take place behind closed doors. TIAACREF has retained, as consultants, two retired CEOs who also sit on compensation committees of major American companies, and they 've talked about the way compensation is actually discussed in the boardroom, based on their informal discussions with compensation consultants. Here 's what they told us about the process. Let 's say a board is discussing whether to award the CEO

Social and political movements, such as Occupy Wall Street, have served to galvanize the debate over CEO pay in the United States. While no one would argue that today’s executives earn more than ever before, a question arises over whether or not limits should be placed on the amount of compensation they should earn. Those who would oppose the motion of placing limits on the amount that executives should earn argue that CEOs pay is commensurate with their performance and the high-risk nature of their job. Similarly, those in favour of the motion would argue that such high salaries only serve to encourage CEOs to engage in risky behaviour while imposing significant social and economic costs on everybody else. This essay will argue that, given the significant economic and social costs of skyrocketing executive pay, that it is imperative that government place limits on the salaries of CEOS of publicly traded companies. In doing so, this essay will trace the rise of executive pay in the American economy, critically examine the issue of whether or not CEOs earn their paycheques and explore the high social and economic costs imposed on others when the wage between is so high. The essay will conclude by examining different options available to government in their attempt to rein in astronomical executive pay.

Even though through 2007 and 2010 CEOs have had substantial cuts in their salaries ranging from eleven to thirty percent, due to reform in the industry the pay and or compensation packages have not decreased. Through long term and short term incentives executive aren't really feeling the losses. While US based auto workers hired before 2007 have not had a raise in almost ten years. According to a study done by THE BUREAU OF LABOR STATISTICS the average hourly earnings of product and nonsupervisory

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

It is with this background of wide discrepancies in compensations between executives and other employees and the fact that executive receive huge compensation packages despite their performance that critics have raised the issue of equity and ethical concerns. The free market system has a culture of rewarding employees based on their ability, merit and performance but executive compensation defies this culture (Mullins, 2007). The equity issues are compounded considering that in countries such as America many workers earn in a year what there bosses earn in an evening (Mullins, 2007). Even among stock investors and anti-globalization campaigners, the issue of pay package is a shared concern with claims that executives pay is extremely high. Recent examples include Freddie Mac CEO, Richard Syron, who received $14.5 million in 2007 and where $2.2 million of this amount was a “performance bonus” (Encyclopedia of Management, 2009).

The stock option plans can create the appropriate incentives to either corporations or employees. For the recipients, it can be regarded to tax reduction. By avoiding the income tax payments, stock option would help the employees with high annualized income salaries by converting part of income to capital gains. Furthermore, stock options are effective way to correlate performance and compensation. In the other words, it implies that compensation would boost the individual performance as well the overall performance of the firm. For the employees in high positions, the compensation would encourage them to act in the best interest of company to foster company growths as well as increase the stock prices. Employees, talented and excellent, are the main purposes of creating incentive plans by the company. Generally, the stock option only benefits the executives with high income salaries and in the decision-making positions, where have ability to impact on the company’s profitability and growth. Therefore, in order to make the stock option plans are more favorable, the company should individualize the package based on different positions. Further, granting the privileges of early exercise or lessen the period of stock options would also motivate the employees to take the plans. These set up of

1. Since 1980 to 2002, the competition and the growth in markets have become tougher and as a result there is a high responsibility. The executives are earning high amount just because they are running and managing companies which are growing very rapidly. Over the years the high increase inflation is generated were the ways in which payment was granted to the people, the change towards the shares from the stock options. T Those two things were happened at the same time. From 2002, the people reacted critically towards the the ways in which these executives were paid. The governance accusations of the shareholders pressurized that these executives are giving protection to themselves and are paid excessively high (Brick et al 2006). Now the executives can be eliminated in an easier way. Companies are paying them because these executives can be replaced very easily. Basically it is the title they paid on the basis of the risks they bear and outstanding performance for the coming year. On the other hand they are paid because stakeholders wanted them to be with the international market. If the companies have to give the response to a problem, there is a counter argument to sustain the option of

Compensation plans are as varied as the companies that implement them. They reflect a company’s culture, financial strategy, organizational structure and goals. Compensation plans serve as the catalyst for employees to join a company and remain, which in turn enables the organization to fulfill its obligation to provide goods and services.

Organizations spend a great deal of time and resources in developing an effective compensation structure-one that is lawful, aligns with the strategy and objectives of the business itself, is externally competitive and can recruit and retain talented employees. However, not all positions will fall into this meticulously composed pay structure. There are groups of employees who will fall outside of the scale used for everyone else, with compensation packages seemingly at odds with what everyone else receives (Milkovich, Newman, & Gerhart, 2016, p. 502). Executives are one such group of employees-specifically senior-level executives, or CEOs. The computation of compensation CEOs receive does not follow the same process as that of other positions. As such, the compensation practices for senior-level executives have come under fire (Milkovich, et al., p. 504). There are many opponents to current executive compensation levels in our economy, many of whom cite the multimillion dollar total compensation received by some Fortune 500 executives compared to average worker pay levels (AFL-CIO, 2014). However, there are also proponents of executive compensation who believe that the inherent risk involved in these positions, in addition to market variables and job duties and responsibilities warrant the, sometimes confounding, compensation figures (Kaplan, 2008). This paper sets out to examine these arguments to determine if CEOs are over compensated in our economy.

“The global financial crisis in late 2007 and in 2008 increased public disquiet about the high level of executive remuneration” Lipton & Herzberg p 316.