Perks and Executive Compensation

Paper Summary:

This paper examines some of the current issues of executive compensation and how prevalent the situation has become. Some of the topics discussed include agency theory, CEO influence over the Board of Directors and CEO compensation - justification and ethics. Lastly it compares CEO compensation in the U.S. and abroad with a look at some outrageous perks.

Outline:
Introduction
Agency Theory
Agency Theory and Executive Compensation
The "Golden Parachute" and Reasons for It
Board of Directors Influence over CEO Compensation/CEO Influence Over BOD
Is CEO's Compensation Ethical?
Executive Compensation in US Compared To Other Countries
Japan
China
Korea/Taiwan
France
India
Germany
Britain
Results
Top 3 Paid CEO's In 2006
Richard Fairbank
Bruce Karatz
Henry Silverman
Outrageous CEO Perks
Conclusion

From the Paper:

"Very few if any CEO's are capable of turning around a failing business on their own; it requires the assistance of every employee. The first to feel the pressure of the failing company is the employee who is given a pink slip. At the same time, the CEO is collecting a salary that could be up to 500 times greater than the common worker. The question becomes does the CEO value his workers? The answer would have to be no, as long as he continues to collect on their parachute even after the company goes bankrupt.The fairness to workers who have lost jobs or had pay levels or benefits reduced in some form while the CEO's are receiving these exorbitant amounts has become an ethical issue. The Golden Parachute has become so lucrative for CEO's that the IRS has developed the Golden Parachute Audit Techniques Guide (Bailey, 1999)."

Sample of Sources Used:

• (2003). Executive compensation. Retrieved October 7, 2006, from Business Roundtable Web site: http://www.businessroundtable.org/pdf/ExecutiveCompensationPrinciples.pdf
• (2005). Big is better-but not always. Strategic Direction, 32 (8), 15-19.
• Bailey, L.D. (1999). Golden Parachutes Under IRS Sections 280G and 4999 -- Rules, Strategies, and Tactics. Retrieved October 2, 2006, from Strasburger Attorney at Law Web site: http://www.strasburger.com/S_show/goldpara/goldpara.htm#BUSINESS%20REASONS
• Bebchuk, L, & Khurana, R (2006). The Compensation Game. Working Knowledge, Harvard Business School, Retrieved October 14, 2006, from http://www.law.harvard.edu/faculty/bebchuk/opeds/HBSoped_CompensationGame_8- 30-06.pdf .
• Blasi & Kruse D, (2003). In the company of owners: The truth about stock options (and why every employee should have them). New York, NY: Basic Books.

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