Valjdrin Fejza Professor Gregory A. Carnes Accy 657 “Tesla’s Executive Compensation Policy”¬ Edward E. Lalwer, a major contributor to theory, research, and practice in the fields of human resources management, compensation, organizational development, and organizational effectiveness, states an effective compensation system will support an organization 's overall strategy as executive 's impact many areas. Executive compensation is a business expense that should be reasonable and competitive because money spent on compensation is not available for other corporate projects or firm projects. This paper will analyze the executive compensation policies for Tesla Motors, Inc. (“Tesla”) and will analyze: (1) How the policies meet the …show more content…
"Long-term" is generally considered to be five or more years for mature companies and three years for other companies (Tesla would most likely fall under "other companies.") CIIG section 5.1 further states an executive pay should be reasonable with respect to the company performance, industry considerations, risk considerations and compensation to other employees. As mentioned above, on August 1, 2012, Elon Musk was awarded options to buy nearly 5.3 million shares of Tesla stock at $31.17 each. CEO Grant provided in 2012 is over a ten years period and if any vesting tranches remain unvested after expiration they will be forfeited. The grant requires certain market capitalization and operational milestones. In 2013 and 2014, Mr. Musk did not receive any additional equity compensation except in respect of certain awards granted during 2013 pursuant to a patent incentive program that was available to employees generally. The Annual Proxy Statement for 2015 states the options provided to Elon Musk provided a motivation to promote corporate objectives and is structured to reward easily measured performance goals that closely align the executive officers’ incentives with the long-term interests of stockholders. CII 's Corporate Governance ("CIICG") section 5.2 advises all companies should provide annual advisory shareowner votes on compensation of senior executives. Section 5.4 requires shareowner approval of equity-based compensation plans
CEO compensation has been a heated debate for many years recently, and it can be argued
Compensation systems can take on many forms, all of which have positives and negatives related to it. However, certain components are noted to be determinants of solid compensation plans. One agreement of a solid compensation system is the use of incentives. “Clearly a successful companies set objectives that will provide incentives to increase profitability” (Needles & Powers, 2011). Incentive bonuses should be measures that the company finds important to long-term growth. According to Needles & Powers (2011) the most successful companies long term focused on profitability measures. For large for-profit firms, compensation programs should offer stock options. The interweaving between the market value of a company’s stock and company’s performance both motivate and increase compensation to employees As the market value of the stock goes up, the difference between the option price and the market price grows, which increases the amount of compensation” (Needles & Powers, 2011). Conclusively, a compensation plan should serve all stakeholders, be simple, group employees properly, reflect company culture and values, and be flexible (Davis & Hardy, 1999; The Basics of a Compensation Program).
With the constant change in today’s business world, to have a competitive advantage makes it difficult for employers to attract and retain the most talented employees. Identifying the company’s compensation strategy ensures the organization offers the right pay and manages the pay increases to retain top talents. When we hear the word compensation we think about compensating an employee for their work performed, but there
I hope this finds you well. As head of the executive compensation committee I am writing this recommendation in order to reach a unilateral consensus on the adequate amount the new CEO just hired should be paid. I want to concisely go over the pros and cons of attempting to follow industry standards and will debrief a compensation plan I have put together that reflects our values as a company.
* Other: Includes long-term, non-equity incentive payouts, the value realized from vesting of restricted stock and performance shares. Also includes other executive personal benefits, such as premiums for supplemental life insurance, annual medical examinations, tax preparation and financial counseling fees, club memberships, security services and the use of corporate aircraft.
However, there have been many cases where the CEO and executive officers receive outrageous compensation even when the companies suffer. Overall, there is a wide disconnect between the incentive of the executives and the financial performance of their company, which needs to be fixed. By passing regulations and rules such as the Dodd-Frank Act, there is hope of shedding light on the connection between the company’s performance and the executives pay. Although it will provide a clear insight, it will not be able to set a strict regulated compensation or define what an executive should earn. Instead regulations will allow for more transparency for the shareholders regarding corporate governance issues such as executive pay. Along with that, it will force companies to take accountability for their actions. If they do poorly, then the executives should be paid less, and vice versa. Overall, there should be a direct alignment between executive pay and the company’s
I light of the strong shareholder rejection, I think the board of directors should reconfigure the terms of the remaining four-year $15 million package. Specifically, I think they should reconfigure the terms tying it to performance in a way that incentivizes the CEO, benefits the corporation and the shareholders, as well as safe holds against the agency
A well-articulated compensation philosophy drives organizational success by aligning pay and other rewards with business strategy. It provides the foundation for plan design and administration and anchors current and future plans to the company's culture and values (Kaplan, 2006, p.32). Recognizing and rewarding achievement is the cornerstone of the company A’s compensation philosophy. The mission of the company is to attract, select, place and promote all individuals based on their qualifications. The company believes that performance-based compensation helps attract, develop and retain talented professionals. In addition to base pay which based upon local market conditions and targeted to be above market, the company provides the following types of potential compensation to reward performance:
While these citizen protests and legislative actions could be an overreaction to a few isolated cases of executive compensation excess, the data suggests otherwise. According to the AFL-CIO (2013), executive pay has increased dramatically over the past several decades compared to worker compensation. In 1982, the pay ratio between executives and workers was 42:1, but by 2012 it had increased to 354:1. This 8.4-fold differential in compensation suggests that the productivity of executives has also increased 8.4-fold relative to productivity of workers. If executive pay is positively correlated with a firm's bottom line, then higher pay should predict success. Unfortunately, researchers have found the opposite to be true.
Read the discussion case "Executive Compensation" on pages 190-192 then answer/discuss questions 1-7 that follow.
The employee total compensation program in Aflac is competitive with the industry market for the employees (Reed, 2009, p. 3). First, the company has a program referred to as a “Total rewards program” for the employees of this organization (p. 3). Next, the focus of the Aflac organization derives from the importance on employees through communication (p. 3). To illustrate, the company’s benefits include compensation such as life insurance paid for by Aflac, policy for cancer paid for by Aflac, insurance for protecting accidents at a low premium for employees, and programs that provides bonuses based on profit-sharing (pp. 4,6). In addition, the organization provides a leadership program to develop employees at all levels within the
This paper will examine setting the stage for strategic compensation and bases for pay. There are three main goals of compensation departments: internal consistency, market competitiveness, and recognition of individual contributions. Internally consistent compensation systems define the relative value of each job among all jobs within a company. (Martocchio, pg. 22, 2011) With this system companies want employees to be paid more based on their qualifications and responsibilities. They believe someone with less experience should be paid differently. To determine such evaluation companies use job analysis in order to provide job descriptions. The job evaluation is to determine pay according to a particular position. Market-competitive
This report explores the issue of the pay that top executives make, and the reasons why they do. It also suggests improvements that can be made to make the system better. High Pay Seems Small When Compared To Company Profits Many companies pull in profits that are extremely high. When an employee of such a companies salary is compared to the amount of profit that the company earns, it starts to seem reasonable. It only makes sense that if the employee is directly responsible for the success of their company, then they deserve to get their payback. It seems ironic, but many salaries even look small once compared with a companies profits. Top Executives Are Under A Lot Of Pressure Being the CEO of a
Given the effect a CEO can have on a company's success, we can understand why their compensation packages
Proper as well as well structured management system is a solid determinant to possible success of any business undertaking. The management team ought to ensure that it deals with any possible hindrance or rather problem that might obstruct the envisioned success. In his endeavors, Elon Musk needs to address the culminating problems in the Tesla motor company. The communication problem needs total address. This is amongst major stakeholders in the motor company. Well structured channels of communication are fundamental without which coordination is all company operations will be hampered. Stiff competition from low gasoline prices which had made the buying of various motors less impressive (Mangram, 2012). More competition from upcoming vehicle manufacturers like Mercedes, BMW, Audi, Lexus, and Porsche that were developing much better electric motor vehicle, and also loss-making due to a struggle to lower the costs to meet customers demand and whether if they could make a profit. Harmonizing the prices of the motor products are therefore a prerogative of the CEO and other members of the management team.