Variable Measurement, Sampling Selection, And Empirical Design Essay

The deferred pension/vehicle allowance amount is a good way to allow executives to accomplish more with the compensation they receive. This deferral will allow them to achieve tax savings, by transferring their salary to a year where they are in a lower tax bracket. Overall, Costco’s executive and CEO compensation is less competitive than Kroger, Safeway and Wholefoods.

different CEO compensation data set from the one used as an example in the next chapter.)

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).

The CEO’s compensation should be set on how well the firm performs and should be awarded based on the performance of the stocks in the long run. It is easier to measure performance by the growth rate in the profits that have been reported since intrinsic value cannot be fully

GAASB is proposing some major improvements to the reporting of pension plans. (GASB Proposes Major Improvements for Pension Reporting, 2011). Immediate recognition of more components of pension expense will be required, including the effect on the pension liability of changes in benefit terms, rather than deferred and amortization over as many as 30 years. Use of a discount rate will be required that applies the expected long term rate of return on pension plan investments where pension assets are expected to be available to make projected benefit payments and the interest rate on a tax exempt 30 year AA or higher rated municipal bond index to projected benefit payments where plan assets are not expected to be available for long term investment in a qualified trust. A single actuarial cost allocation method, the entry age normal, will be required. Governments participating in cost sharing multiple employer plans will be required to record a liability equal to their proportionate share of any net pension liability for the cost sharing plan as a whole. Governments in all types of covered pension plans will be required to present more extensive note disclosures and required supplementary information.

Pension plan funding shortages for city, state, and federal employees, as well as employees in for-profit businesses, have stirred significant debate in recent years as government agencies and businesses struggle to manage revenues, expenses, and the key thread within the mix, the pension plan participants. The issues associated with pension plans present challenges to the management leadership in balancing the commitments to the pension plan participants and to the overall well-being of the city, state or federal entities, or the business shareholders.

The economic downfall of 2008 illustrates the impact of unbridled corporate pay structures on our economy. Securities fraud, committed as a result of incentive packages offered to executives to create quick profits, had a detrimental effect on the overall economy. As observed during the Bank and Loan bust of 1989, CEOs take greater risks when offered stock options in their compensation packages. The 2008 Financial crisis, sparked by subprime mortgage market and hedge funds, was driven by banking executives making short term risks that served detrimental to stockholders in the long run. Furthermore, many compensation packages offered Golden Parachute clauses with no claw backs to both performing and underperforming executives.

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

Sampling strategy is a focus on a smaller group to determine the conclusions of the larger population (Cooper & Schindler, 2014, p. 338). In this instance, the McMahon Group employed both focus groups and mail surveys as strategies to gather information and the dual approach produced relevant and valuable data for researchers.

Read the discussion case "Executive Compensation" on pages 190-192 then answer/discuss questions 1-7 that follow.

The practice over overpaying company CEOs in contrast to the general employee population is not considered a valid reward distribution system. As reported in the “The State of Working America”, the ratio between CEO salaries and average company wages was approximately 19.2 to 1 in 1965. In 2011, this ratio was nearly 220.2 to 1 (Mishel, Bivens, Gould, and Shierholz, 2012). Per Mishel, Bivens, Gould, and Shierholz (2012), this ratio has experienced a 177.15-point decrease from the year 2000, when the

During the economic crisis, the cost of giving compensation to executives is the relief capital could be spent elsewhere within the organization and not be handed down into their executive’s

It was reasonable for a CEO’s compensation to increase as the company expanded and became a larger entity, and the newly-granted shares and increasing stock options further aligned the CEO’s personal interests with those of the company and shareholders. In this sense, the second compensation package was also well-structured and not excessive. Seeing Sunbeam’s revenue rising and stock price climbing steeply upwards, Sunbeam’s shareholders and directors were fully convinced by Dunlap’s leadership, so they might perceive the increase in compensation amount necessary to retain and better motivate Dunlap to enhance the company’s value. Nonetheless, they neglected the fact that the increased portion of the equity-based compensation also further motivated the CEO’s dangerous behaviors pertaining to improper earnings management.

Given the effect a CEO can have on a company's success, we can understand why their compensation packages

With the shares vesting in the future, Blackstone expected to face deferred cost approximated $13 billion. It may record significant net losses for a number of years following without paying any interests or dividends hereafter. As a result, Blackstone developed a metric called “economic net income,” which excluded the impact of income taxes, noncash charges related to the vesting of equity-based compensation, and amortization of intangible assets. By using the economic net income metric, the Blackstone‘s executive team argued that this metric was justified, as the future noncash charges reflected an extraordinary situation, incurred only because of the one-time event of the firm’s listing. Moreover, the stream of income against which these expenses would be offset was uncertain but highly likely to be more than enough to cover these costs. Furthermore, the management team also thought that this $13 billion expenses was based on the extreme assumption that all the employees would not leave their jobs in the coming eight years. If they left the firm before their vesting