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Monthly videos are distributed that explain the

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Monthly, videos are distributed that explain the calculation of the bonus and the rationale and that show executives discussing operational and marketing strategies. I. Managerial and Executive Pay —Because of their significant ability to influence organization performance, top managers and executives are a strategically important group whose compensation warrants special attention. One concern appears to be that in some companies rewards for executives are high regardless of organizational performance. A. Executive pay can be linked to organizational performance (from an agency theory perspective) by making some portion of executive pay contingent on company profitability or stock performance. This may mean less emphasis on noncontingent pay and more emphasis on outcomeoriented contracts, both shortterm and long-term. B. There has been increased pressure from regulators and shareholders to better link pay and performance. The Securities and Exchange Commission (SEC) requires
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companies to report compensation level for the five highest paid executives and the company’s performance relative to that of competitors over a five-year period. In 2006, the SEC put additional rules into effect that require better disclosure of the value of executive perquisites and retirement benefits. C. The cost of benefits adds an average of 37 percent to every dollar of payroll, thus accounting for about 27 percent of the total compensation package. Controlling benefits is crucial for competitiveness. D. Although it makes sense to think of benefits as part of total compensation, benefits have unique aspects.
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