Article Title: WHK Changes Remuneration to reward stars
The article pertains mainly to employee compensations and the incentives which govern that compensation. The company due primarily to the prevailing market sentiments has incurred a steep decline in earnings and profit margins. Management therefore, wants to realign incentives to encourage both revenue and profit margin growth within the company. The companies inability to grow organically while maintain a competent work force have put downward pressure on the margin. As such, the company wants to provide incentives by which employees can grow revenue, earn money for themselves, while also helping the company grow organically.
Theory Identification and Key Points:
Agency Theory, contracting costs, and firm value is the relevant issue pertaining to the case. Agency theory, contracting costs, and firm value are all predicated on aligning incentives with benefits. This alignment creates an atmosphere where all stakeholder groups have a vested interest in the company. Contracting theory for example pertains to issue of executive compensation and aligning incentives to maximize the WHK shareholder wealth. Agency theory pertains the relationship (or lack thereof) between an individual and those that represent the individual. This occurs when management does not act in the best interests of shareholders, as is the case with WHK. Both concepts relate to firm value as misplaced incentives can lower the