The Executive Compensation Committee of the Board of Directors has asked your CFO to develop a report of what has transgressed in the area of executive compensation in U.S. corporations to ensure that they are aware of what has happened in this area. Your CFO has asked you to develop a report that includes the areas of executive compensation, the complaints from employees, the rationale from the executives, and what the U.S. government has done about these complaints.
The student should write a report to the CFO that addresses the following:
1. Explain why you believe that employees are outraged about outlandish executive compensation while their own pay has been reduced.
2. Describe your assessment of at least 1 example of compensation packages that appeared to be for the benefit of the executives, regardless of the cost.
3. Analyze the rationale of executives in cases when their compensation package is outwardly perceived as excessive.
4. Explain what the government has done in the attempt to curtail these apparent abuses in compensation.
5. Recommend what you believe constitutes an ethical executive compensation plan.
6. Include at least 3 properly researched facts as they apply to the debate of CEOs and excessive compensation.
7. Follow APA guidelines in citing the references.
Solution by Gregory Grant
Executive compensation consists of primarily salaries, performance bonuses, and stock shares. In most cases, the compensation extends to benefits including health, dental, and vision coverage. Business perks such as company vehicles, homes, credits cards, and vacations are included. Chief executive officers (CEO) tend to negotiate the executive compensation packages with the hiring Board of Directors.
Complaints From Employees
Employees complain based on their level of understanding and knowledge of executive compensation in correlation to their economic and social status. For example, entry level employees with no benefits making less than 20,000 annually will have a different point of view from mid-level managers making 65,000 annually with benefits. However, the point of view that is common is that both employees may complain that the CEO is over-compensated. The myth is that CEO salaries increase while mid-level and entry-level employee wages remain the same or the fear of downsizing takes place. While the complaints of employees are based on opinions rather than facts, the fictional opinions spread ...
This solution discusses business ethics from the perspective of executive management compensation plans. Students will gain more insight concerning the reasoning for the debatable CEO compensations versus employee perceptions.