In a 2-3 page paper, discuss the case listed below:
In a 2012 survey of 300 large U.S. corporations, the Hay Group found that the median CEO received $10.1 million in total compensation (which includes salaries, bonuses, and long-term incentives such as stock options.). Compared to 2011, total CEO compensation increased 3.6%, while the average worker’s pay raise was only 2.3%. The survey also found a somewhat stronger link between CEO pay and the firm’s performance (as measured by profits and stock returns).
Over the past three years, total compensation has increased only slightly after accounting for inflation. Moreover, the structure of the average CEO compensation package has remained somewhat similar–the typical CEO has received a salary of $1.1 million, an annual bonus of around $2 million, and stock options initially worth $7 million. Arguably, media scrutiny and investor concerns about excessive compensation have led some companies to limit the compensation paid to their top executives. A further concern is the recent “Say on Pay” provisions in the 2010 Dodd-Frank Act, which give shareholders the ability to vote on whether they approve of the CEO’s compensation package. While these votes are nonbinding, they have put pressure on firms who want to avoid the negative publicity surrounding a shareholder vote to reject the pay plan.
While the increase in average CEO pay was fairly modest in 2012, many top CEOs still received extraordinarily high levels of total compensation. The top five highest-paid CEOs were: Oracle’s Larry Ellison ($94.6 million), CBS’s Leslie Moonves ($58.8 million), Walt Disney Co.’s Robert Iger ($36.3 million), Nike’s Mark Parker ($33.9 million), and Viacom’s Philippe Dauman ($33.1 million). At the same time, many CEOs who have received stock options in previous years have seen the value of these options increase dramatically because of the recent run-up in the stock market.
The modest increase in CEO pay over the past three years follows declines in median compensation in 2008 and 2009. Looking at a longer time frame, average compensation levels are significantly higher than they were a decade ago. (Average CEO compensation in 2002 was approximately $3.7 million.) The large shifts in CEO compensation over time can often be attributed to the increased importance of stock options. Relatedly, over the past few years, a small number of CEOs have attracted attention by announcing that they are only going to accept a $1 cash salary. A recent study finds that shareholders of these firms don’t do particularly well, but the CEOs’ total compensation doesn’t suffer since they instead receive offsetting compensation in the form of stock and stock options. The study concludes that the primary reason that these managers announce their $1 salary is to “employ camouflage in compensation schemes to avoid public outrage over excessive private benefits.”
Read the article below:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1571823
Questions:
1) Consider the trends over the past few years in CEO pay. How does this make you feel?
2) Do you believe CEOs that accept a $1 cash salary only do so because they receive other compensation in different forms such as stock or stock options?
3) Why do you think CEOs would do this?
4) Do you think accepting a lower salary, announcing it publicly, and then offsetting the loss with other forms of compensation is an unethical act? Why or why not?
5) Why do you suppose shareholders don’t do particularly well with a CEO that accepts a $1 cash salary?
After completing research on the internet, answer these questions:
What companies can you locate that have CEOs who accepted a lower salary?
Did the CEO do so to avoid public outrage over their excessive private benefits?
Or do you feel as though it was done in the best interest of the company?
Last Completed Projects
| topic title | academic level | Writer | delivered |
|---|