Executive Compensation and incentives

Executive Compensation and incentives - Executive...

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Executive Compensation and incentives
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Introduction of the topic Who are the executives? What are the expectations from executives? What is the relation b/w management performance and compensation? 2
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Introduction Executive officers develop the corporate strategy and business model, and oversee daily management of the firm. As with any employee, executives require compensation for their work. Compensation packages must be sufficient in terms of their level and structure to attract, retain, and motivate qualified executives to create shareholder or stakeholder value. 3
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Introduction (Cont’d) Compensation committee of the board and independent directors approve the compensation of the executives Problems: Its not easy to find right kind of execs Difference in the supply and demand so compensation becomes very important issue in order to attract and retain the right kind of executives 4
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Controversies over exec compensation-1 Executive compensation has long been a controversial topic in corporate America. In the 1930s, economic depression coupled with enhanced disclosure laws mandated by the Securities and Exchange Commission (SEC) stoked popular outrage over some executive compensation packages. Particular ire was reserved for the compensation paid to executives of the industrial and financial power- houses of the time, including Bethlehem Steel, General Motors, American Tobacco, and National City Bank, who each received compensation in excess of $1 million. The sentiment of the era is perhaps best encapsulated by Justice Thomas Swan of the Circuit Court of Appeals, who wrote that “no man can be worth $1,000,000 a year. Again raised in the 80s, 90s, and even recent financial crunch Even Barrak Obama raised the issue 5
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compensation-2 Outside observers have decried the trend. According to the AFL–CIO “Executive PayWatch,” the ratio of pay between the average CEO and the average company employee has grown to unacceptable levels, rising from 42 in 1980, to 525 by 2000, and down to 263 by 2009. The unions blast corporations for a large discrepancy According to a survey by Corporate Board Member magazine, 60 percent of directors believe that U.S. company boards are having trouble controlling the size
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This note was uploaded on 03/07/2012 for the course FINANCE 245 taught by Professor Hameed during the Spring '12 term at IMSciences.

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Executive Compensation and incentives - Executive...

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