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Who should give the ethical audit to decision makers for an incentive plan?

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If you were designing an incentive plan for a publicly traded company, whose voice do you think should provide that ethical audit at the table of decision makers? The chairman? The board of directors? The shareholders? The employees? The executive team or compensation committee? Outside consultants? Internal HR director? A combination of all of these?

Who in your mind would be the best to ensure that the incentive plan does not cross the line and motivate the wrong kind of behavior-the kind that turns a plan from motivating good behavior into motivating wrong-doing based on the potential for a high reward?

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Solution Summary

The solution discusses which groups or individuals within a publicly traded company should be involved in the design of an incentive plan, including the ethical considerations to be reviewed. The role of outside consultants is explored.

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INCENTIVE PLAN DESIGN

A key consideration would be the target population. If this designed for executives, then the Compensation Committee of the Board of Directors would definitely need to review the plan and would no doubt use external consultants.

If the plan is for general management, the Board of Directors would be involved only if their charter required it. However, if it is a corporate-wide plan, they will probably be briefed by the CEO and VP Human resources.

Ethical Considerations

The Sarbanes-Oxley Act does not directly address incentive plan. However, companies in general want to improve ethical reputation, recordkeeping and accounting practices to increase their transparency of all expenditures. Therefore companies are looking ...

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