Some other measures have been instituted to keep organizations less financially burdened. However, these measures have not helped the case for questionable executive compensation. Generally, to streamline expenses, many publicly traded companies now critically review their existing compensation plans and structures to make sure that they are properly adapted to the current economic and financial environment (Schneider, P.J., 2013). Most boards now staff their compensation committees exclusively with outside directors and permit them to hire their own consultants. Besides, some have pegged compensation for their top executives at not more than fourteen times multiple of other bottom-level workers’ pay. (Lawrence & Weber). My Position on High Executive Compensation Executive compensation may not be fixed arbitrarily as the Dodd-Frank Act attempts to do – considering the lapse that stockholders suggestion on executive pay may not be binding or enforceable. Organizations where the executive compensation committee are substantially outsiders, and where the CEOs deeply influential social ties are absent, executive compensation are now being tied to organizational performance over a period of time. It is true that executive compensation in the U.S, seem ‘outrageous’ when compared to CEO compensations in other
DISCUSSION BOARD FORUM 4 THREAD 6 European or Asian countries, it would not be said to be underserving for all U.S CEOs. There should be some flexibility when considering this issue in the context of a highly competitive and free market economy. For CEOs like Fabrizio Freda, whom led Estée Lauder beauty products company to stunning success, a compensation of $21 million in 2008 was considered as ‘clearly worth it’. (Lawrence & Weber). In contrast, a situation where Stanley O’Neil of Merrill Lynch earned $70 million over four years and was paid an additional $161 million as severance pay for supervising – so to speak, the bankruptcy of the organization, in my opinion, is not a deserving compensation, to say the least. Beside these two ways that have played out about high executive compensation, there is a major trend where the stockholders now have a more assertive say. At Citigroup, shareholders had refused to ratify ‘excessive’ compensation for its CEO, and had been able to show their displeasure to the board by such refusal (Lawrence & Weber). Though the Dodd-Frank Act is new, fine-tuning it for pragmatic application has led some legislators and shareholders to call for a ‘clawback’ policy. This policy that would cause executives of failed organizations to pay back some of their earning has been adopted by eighty-four percent of U.S. large organizations (Lawrence & Weber). Conclusion The case of failed management leading to enormous financial loss, and even bankruptcy of some large organizations, as in the case of Enron, WorldCom and Merrill Lynch; and the effects of recession on the U.S. and world economy, served as basis of outcry against high executive compensation. CEO involved with failed organizations should not get high compensation. However, evidence has shown that the management of some large organizations brought in impressive results and compensation to shareholders and themselves. CEOs of such
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