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Agency Conflicts and Corporate Governance

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The following quotation appeared in the Fortune magazine "I have never asked to serve on a corporate board, never even hinted at wanting to be on one. And I have never asked to be on a compensation committee. I suspect that the reason I've been put on so many is that word gets around that I believe in paying people very, very well... I cannot sit and say to you what the right compensation number is. That's the judgment call, the business judgment call. That's what a board of directors does... What I know most of all is that when I see extraordinary effort and results out of a CEO, you can't pay him enough."

Evaluate the comments made by this particular director.

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The solution discusses agency conflicts and corporate governance.

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In this paper we will evaluate and perform a deep analysis of the quote of the director and we will also look at all the aspects of the statement.
The above comments reflect the personality and popularity of the director amongst his people. The quote "I have never asked to serve on a corporate board, never even hinted at wanting to be on one. And I have never asked to be on a compensation committee. I suspect that the reason I've been put on so many is that word gets around that I believe in paying people very, very well" is a rationalization statement where the director has justified his position by giving reasons for why he has been put in such a high position. This statement also reflects the popularity of the director amongst his people and highlights his liberal policies regarding pay structures. This comment also reflects high expectations of the employees from him regarding their compensations.

If we analyze, we can say that this statement is true in some sense. We can see a lot of examples in business world where company is performing extremely well because of their liberal compensation policies. They pay their employee very well in order to keep them motivated and to retain them for a longer period of time. Take an example of Google. It is popular in the industry for its extremely good compensations to its employees; apart from good salaries, they also distribute their profits amongst their employees and stakeholders. As a result, it is performing extremely well with a high morale and enthusiastic team of employees. This has also made Google the best corporate company to work with in the world, according to several ratings ...

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