Executive Compensation
Where we were, Where we are, Where we going
By Cara Chengalath
Instructor: Berhane Elfu
JRSB 309 - Corporate Governance
February 11, 2013
Introduction In the aftermath of major scandals and bailouts in the United States, the world`s and the public’s confidence in public corporations, has been shaken. With the publicized scandals of Enron and other corporations in the United States, the faith in public corporations fell as fast as the stock market. Investors had no confidence in corporations or in their boards. Measures needed to be taken to form regulations to provide stronger accountability, to prevent these types of scandals from happening and to rebuild the confidence of investors. Corporate governance of publicly traded companies was no longer an option, it became a must. The public and the media demanded laws to protect future investors and shareholders (Colley, Jr, Doyle, Logan, & Stettinius, 2005).
With most of the world’s financial markets in crisis and recession, the public has become much more aware of corporate executive compensation plans. Executive compensation has been an on-going issue for many years. There has been a great amount of controversy over how executives’ pay structure is designed and who judges, oversees and determines executives’ pay. As the scales get tipped on what executives are getting paid versus employee standard wages, the public is always on the watch for the next corporate scandal. Boards are always challenged by what executives’ pay should be based off of; this could be performance, industry standards or percentage of revenue. Boards need to determine the base salary, benefits or short term and long term options that will be offered (Colley, Jr, Doyle, Logan, & Stettinius, 2005).
This paper will look at the past trends of executive compensation that lacked disclosure and transparency, current trends that are being used today in pay in the United States and Canada and future trends that should be used when it
By Cara Chengalath
Instructor: Berhane Elfu
JRSB 309 - Corporate Governance
February 11, 2013
Introduction In the aftermath of major scandals and bailouts in the United States, the world`s and the public’s confidence in public corporations, has been shaken. With the publicized scandals of Enron and other corporations in the United States, the faith in public corporations fell as fast as the stock market. Investors had no confidence in corporations or in their boards. Measures needed to be taken to form regulations to provide stronger accountability, to prevent these types of scandals from happening and to rebuild the confidence of investors. Corporate governance of publicly traded companies was no longer an option, it became a must. The public and the media demanded laws to protect future investors and shareholders (Colley, Jr, Doyle, Logan, & Stettinius, 2005).
With most of the world’s financial markets in crisis and recession, the public has become much more aware of corporate executive compensation plans. Executive compensation has been an on-going issue for many years. There has been a great amount of controversy over how executives’ pay structure is designed and who judges, oversees and determines executives’ pay. As the scales get tipped on what executives are getting paid versus employee standard wages, the public is always on the watch for the next corporate scandal. Boards are always challenged by what executives’ pay should be based off of; this could be performance, industry standards or percentage of revenue. Boards need to determine the base salary, benefits or short term and long term options that will be offered (Colley, Jr, Doyle, Logan, & Stettinius, 2005).
This paper will look at the past trends of executive compensation that lacked disclosure and transparency, current trends that are being used today in pay in the United States and Canada and future trends that should be used when it
References: Bruvik, K., & Whitney Gibson, J. (2011). The past, presentand future of executive compensation. Business Studies Journal, 3(1), pp. 69-83. Colley, Jr, J. L., Doyle, J. L., Logan, W. G., & Stettinius, W. (2005). What is Corporate Goverance? New York, NY: Mcgraw-Hill. Geddes, G. (n.d). Executive pay packages: Compensation planning in light of increased scrutiny. Retrieved 02 08, 2013, from Gowlings: http://www.gowlings.com/knowledgeCentre/publicationPDFs/Executive%20Pay%20Packages%20Compensation%20Planning.pdf Mangen, C., & Magnan, M. (2012). "Say on Pay": A wolf in sheep 's clothing? Academy Of Management Perspectives, 26(2), pp. 86-104. Mendleson, R. (2012, 01 04). Canada CEO Compensation: Companies Hesitant To Debate Executive Pay. Retrieved 02 08, 2013, from The Huffington Post: http://www.huffingtonpost.ca/2012/01/04/canada-ceo-compensation-companies-resist-debate_n_1183800.html Milne, J. A. (2006, May). Good corporate governance, good performance. Benefits & Compensation Digest, 43(5), 34-38. Moncrieff, J. (2012, December 18). CCGG Releases 2013 principles of executive compensation. Retrieved 02 08, 2013, from Canadian Securities Law: http://www.canadiansecuritieslaw.com/2012/12/articles/corporate-governance/ccgg-releases-2013-principles-of-executive-compensation/ Romano, R., & Bhagat, S. (2009). Reforming executive compensation: Focusing and committing to the long-term. Faculty Scholarship Series. Stikeman Elliott. (2009). Topics and trends in executive compensation: wealth accumulation analysis. Retrieved 02 08, 2013, from Canadian Securities Law: http://www.canadiansecuritieslaw.com/2009/05/articles/continuous-timely-disclosure/topics-and-trends-in-executive-compensation-wealth-accumulation-analysis/