+1-817-968-5551
+61-488-839-671
+44-7480-542904About Expert
Key Topics
Requirement
1- Write a report on Corporate Governance with reference to Chicago.
Solution
Introduction
There had been many examples in the past which have made the remunerations paid to the top bosses of the corporate under question. The 25% voting rule that can divide the Board of Directors into two for the 2 consecutive remuneration reports as per the “Two Strike Rule” makes the report on remuneration to be rejected. So the stakeholders with a quarter of its representation may rig the process and involve themselves in major scandals. In 2016 such a scandal came to forth when the Target Group a part of Westfarmer’s group was seen to have many cases pending a 2 Billion AUD Write Down of the Target and a Queensland Cole mines.
The Executive’s Payments
For many a decade now the businesses has shown that the difference of the salaries and perks for the people in the top position of the bushiness across the globe is much higher than the people working for the business at a lower level. Hence the surveys were conducted to understand the people’s overview on the subject for which a survey was conducted in the US. As per the article in the Global Standards the survey of the Rock Centre for Corporate Governance shows some astonishing results like the people’s knowledge of the CEO’s payments aren’t clear but they think that the position draws too much money. Therefore, the survey shows that 74% of the people suggested that the CEOs are overpaid relative to any average worker, 62% thinks there has to be ceiling of maximum pay for any CEO along with 49% who thinks that the Government must intervene to change the CEOs pay structures . The stakeholders were not aware of the amount the CEOs were making for an example the CEO of Disney Robert Igermade 46 Million USD a year , Rex Tillerson the CEO of Exxon Mobile gets 33 million USD annually, the Walmart pays 22.7 millions to the CEO Douglas Mc Milan . For many people these facts were unknown so the result was that the survey finds the people to be unaware of the amount which in other economies were so huge for one person to earn for being the chief of a business. So it’s about 200 to 300 times more that the CEO makes than an average worker which was last revised to 20 times the worker’s pay in 1965 by Economic Policy Institute. Since then the business has brought in people and paid them as per the will of the personnel they wished to bring in as the CEO. Since 1978 till 2017 the CEOs salaries has seen a 997% increase when adjusted for the inflations .
Thus it was seen that the businesses across the globe hires the top talent with the attractive salary for a leader who would come in and increases the business value for everybody’s benefits. However, it was seen that the people were sceptical and suggested that with each 100 million increase of the business the CEO should be given 3.2 million additionally . This suggests that there is a need for the revision of the CEOs payments for the people to have faith on the capabilities of the business and its offerings to all its stakeholders.
Money and Hindrance to top performance
Previously we have seen that the people with best talents are hired by the business to get the best out of them. But higher money doesn’t actually gives the best of performance capabilities or challenges that the talent was looking for. The money after some time get fixated on incentives as the scope gets limited or makes the executive believe that the targets would be achieved automatically or gets such conviction making the business not try that hard what they would have done otherwise.
The case of Lehman Brothers is one which is interesting where the CEO Richard Fuld took hone 59 Million USD from his job from 2000 to 2007 and the company had to be sold in September 2008 for bankruptcy. This is a great example where the high-payed CEO was unable to turn around the business and thus the business had to be sold or closed which again amounts to the stakeholder’s losses.
Corporate Governance
The issues which the business deals in that allow the business to get the direction and behave accordingly. So the theory of corporate governance suggests the way the stakeholders and the processes of the business has to function. The owners and stakeholders of the business gives the direction of how it should function where the board of directors implement the same among the business managers to see the same is transmitted below for the best attention of the needful. However the criticism is that it makes the processes such that it gives the liberty of people to perform at work with new ways and techniques . So the government is needed to interpret and decide if the practices are needed.
There are legislative responses to such where the business may reduce the payments if the firm is not doing well. So the business is also asked to disclose its packages paid so that the stakeholder knowledge and right to vote on the issues are made legal. The CEO of Westpac made 9.1 million in the year 2012-13 while Ian McLoed of Coles made 10.7 million in the year 2012-13 alone . Such are huge expenses by the business and access how well the people responsible for the corporate management have performed is mandated by the financial laws.
The payments of the top executives are bound with few cash, perks and commission components. They vary from business to business. The divisions may be like salaries, bonus, profit sharing, and commissions, perks etc. the ratio varies where the commission is the best way that the salaries are made to go up to ensure that the employee gets the best of benefits from all angles like tax and cash in hand.
Sustainability
The examples of Lehman Brothers or Coles are great example of how the sustainability and the top executive’s salaries are not directly related. The ways the business is developing the individual elements and people is important for its sustainability along with the top boss performance from the leader. Sustainability reporting makes the basis for the people and their performance to have the needful inputs which may further help the business to get in the needful changes that suites the various aspects of business like the top executive’s payments. For the sustainability the business has to balance each of its expenses and suggest why and how the same is aiding the sustainable business practices in the business domain. So the legitimacy theory and the trend to respond to pressure has made the legitimacy of the business goals.
So the sustainability makes sure that not only stakeholders but also the people at large is aware of the operations and the business as a whole. So this ensures the long life for the business and the organization for its future. So the responsible aspects of the business ensures that the business dose well and keeps the good job on. The way the top bosses gets paid is thus having the problem where the people and the aspects of their salaries are in coherence. If the payments to the top executives are high without any positive development of the business and its aspects brings the question of overpaid for the job like thoughts.
Agency Theory
The key consideration of the agency theory is related to the complication generated from the separation of the owners and managers. In this respect, the key emphasis is being focused upon the reduction of the problem by implementing various governance mechanisms to control the actions of the agents in terms of the jointly held entity. In the joint stock companies, the managers can work for the owners in terms of taking certain decisions but in case any kind of self-oriented actions are being taken place, certain procedure of separation of ownership is being emerged in this regard .
-
Causes of agency problem: The agency problem can caused by various reasons among which, the separation of ownership from control, risk preferences, duration of involvement, limited earnings, decision making, information asymmetry, moral hazard and the retention of earning are some of the key consideration which should be taken into consideration in order to prevent such problems.
-
Agency Cost: The agency cost is the cost that is being incurred due to the agency conflicts and being regarded as the internal costs. In this respect, there are certain costs which are associated with this, such as the cost of examining and picking up an agent, creating a fix performance benchmark by collecting information’s, monitoring the actions of the agent, cost of preparing the bond and the loss generated from the inefficient decision making approach of the agent.
-
Agency cost and ownership structure: In order to reduce the agency cost, the ownership structure is being taken in to consideration. Such structure is being used for the purpose of monitoring the actions of the managers in order to avoid the lack of proper integrity among the managers in an organisation.
Place Order For A Top Grade Assignment Now
We have some amazing discount offers running for the students
Place Your OrderPeople’s Perceptions
The Kasperkevic (2019) article on the top executive’s payment study is a great study done to evaluate what the CEOs do to get paid those large amounts. The recent New York rally of the people that demanded the corporate greed out of business big or small is a good example of the people’s views on the CEO pays. In 2016 alone the surveys showed that the CEOs get an average 13.1 Million USD to an average pay of 37622 USD for a non-supervisory role. The US congress had a rule back then but in 90s the CEOs pay skyrocketed where the businesses paid unjustified amounts to the top executives . The Rock Survey was mentioned here too where the people’s belief of what they thought to what it was actually had a 10 times difference. The people had no idea that the American CEOs are so highly paid but was unsure for doing what. So the idea came that the business needs to justify the payments to its CEO. A new survey was proposed to change this with a data of how much of payment is right for a market talent to attract the most motivated and capable person for the job .
The findings of Donatiello out of the survey conducted on 250 various US top executives were studied where it was found that the Directors believe in strange facts . The directors believed that the job is too difficult and only the best person in today’s day and market can perform that way. They further added that the competitor’s CEO can be replaced by only six executives so they pay such higher amounts to get to the top position as its risky and needs great amount of skills. So the directors believed that only a tiny pool of people can develop the company. Hence the justification for the same was suggested as if the CEO was an omnipotent character on who the business relied. The too much of dependence caused Lehman brothers its collapse . However, the director’s survey was rewarded only once for their character.
The Management’s Responsibilities
The management of any business especially the board of directors should understand that the business needs to develop its skills and people to develop the next in line. There at times people in house who don’t get the right opportunity to develop the needful skills that would drive them ahead. The business since the last few decades has only followed the example of the competitors to sustain and grow but some in-house justification of manpower development was missing from the role of the managing in the business as was evident from the examples of in-house remunerations. The age of internet boom in the 90s made the businesses go global from a certain market of operations.
The management was responsible to the shareholders for the profits so the price of someone who can be shown as the front for the director’sbehindwhom the board can hide in concerns were the way out. This was a tragic and a strategic mistake made during that era where the internal manpower were not given enough to challenge the capacity or calibre of their own to be displayed . This came at a very high price for the business. The business had to rely on the data from the market which were not the actual tale of the business. The directors could have earned more with the right selection and not to have relied on the competitor’s personnel to take over as the top position. At times the business do well due to the decision that they take which may not be the CEOs idea but the CEO deserves the respect for it but it should also give the CEO enough space to manuver in the risks so that the business dose well irrespective of how big the challenge is. The challenges and setting the speed ahead is the CEOs job but he also needs to work with a diverse group of people who are associated with the business .
Get the best coursework writing help service from Allassignmenthelp.com native experts and excel in your academics. We offer customized international finance assignment help at the most affordable price. To avail of our service, simply pay and hire an online homework doer from our website who will write the perfect assignment for you while adhering to all of your specifications.
The business operations
The business needs a rapid improvement and investments in-house to develop the personnel it needs to fill the positions next in the hierarchy. The CEO may take a lot of decisions but it’s the CEO who has to play the strategies right where risks are involved. The team under the CEO, the practices of the leaders etc are also to be set by the CEO so that the team may understand and evolve in such a fashion. If the path is not yielding the results, the company can give the statements and do the back up. This way the CEO needs to establish the needful place than be giving the whole of trajectory a new direction.
The team play with the CEO as the chief gives the team and the CEO a mutual learning which further gives the business ample chance to have new ideas and goals to come in. The team can be such that the board can get the needful inputs from the member even when the CEO is not available. However, the business has to see that the last decision is coming from the CEO to respect the leadership and trust their instincts and thoughts if they have a good back up plan with it as well . The CEO should not have such ample powers to alter the board’s decision as was the case with the Westfarm in Australia. So the needful checks and balance is needful for the sustainable business as well as its long term well being. The leader’s team has to have the flexibility to be as competent as the top boss to do the needful decisions at his absence. Further, they need to learn to take responsibilities and not project the top boss as the top star but as the best player in the team who plays along with the team. Such diversification of business and its ideas needs to be so that they can take big decisions along with its needful responsibilities .
How to achieve it
The huge Gap between the CEO and the workers for the business should be a concern as the business shows to stoop down to the competitor’s ideas and are not developing its own manpower in-house to take the needful challenge. The leaders role has to be both in managing the team as well as its development for the future needs so that the business always have a great in house talent pool ready to replace the one above. If the business gets dependence on one particular personnel then it loses its grip of decision making or needful supervision. The case of Nike and its operations in the South East Asia has to be taken up by the top bosses to ensure such loss of fame don’t happen again as was in 2011. The business needs to establish its own in-house rules which ensure the payments for each level and try to get the personnel in the needful cost . This ensures that the business is spending well to generate the success story divided among the people below as well as horizontally. A lots of viewers and revenue distribution needs to be known by the stakeholders so that they may question and the CEO and the board needs to answer and justify them. In many cases the salaries of the top bosses are declared in the annual returns which should be circulated among the shareholders to know what is the top man getting to justify what they are getting in returns. Further, the Board of Directors needs to think out of their own benefits but for the larger benefits and scope where the systems are democratic.
Conclusions
The top position in a business can’t be left the way it is for the multinationals for the only talent for the business but that should have the choice of selection from a host of different businesses. The revenue paid to the CEO has to be as justified as per the laws and its direction in the nation. The business Directors can’t be living behind a figure to have their interests protected. The people’s knowledge about the amount been paid to the CEO has to be declared so that they know the justifications for it. The ethics of the business has to regulate such positions and not the greed alone to succeed in the markets.
References
-
"Do Ceos Deserve Their Pay?" 2019. INSEAD Knowledge. https://knowledge.insead.edu/blog/insead-blog/do-ceos-deserve-their-pay-8351.
-
Bertrand, Marianne, and SendhilMullainathan. 2000. "Do Ceos Set Their Own Pay? The Ones Without Principals Do". SSRN Electronic Journal.
-
Cox, Jonathan F. 1995. "Business Without Bosses: How Self-Managing Teams Are Building High Performing Companies". Organizational Dynamics 24 (1): 83-84.
-
Images, Jeff, and Donna Tam/Marketplace. 2019. "What Do Ceos Do All Day Long To Deserve Their Pay?". Marketplace.Org. https://www.marketplace.org/2018/01/01/business/ive-always-wondered/what-do-ceos-do-all-day-long-deserve-their-pay.
-
Karabell, Shellie. 2019. "Executive Compensation Is Out Of Control. What Now?". Forbes.Com. https://www.forbes.com/sites/shelliekarabell/2018/02/14/executive-compensation-is-out-of-control-what-now/.
-
Lynch, Sarah. 2019. "Are Ceos Overpaid?". Stanford Graduate School Of Business. https://www.gsb.stanford.edu/insights/are-ceos-overpaid.
-
Symionds, Matt. 2019. "Big Company Ceos Just Aren't Worth What We Pay Them". Forbes.Com. https://www.forbes.com/sites/mattsymonds/2014/03/06/now-its-official-big-company-ceos-just-arent-worth-what-we-pay-them/#13786fef3be4.
-
Traxler, Dale. 2019. "Outsourcing V. Hiring In-House: Pros And Cons | Practical Ecommerce". Practical Ecommerce. https://www.practicalecommerce.com/Outsourcing-v-Hiring-In-house-Pros-and-Cons.
-
Wowak, Adam J., Michael J. Mannor, and Craig Crossland. 2018. "Do Ceos Receive The Pay They Deserve? A New Vantage On A Familiar Question". Management Research: Journal Of The Iberoamerican Academy Of Management 16 (1): 47-56.
-
Yan Cheung, Hoi, and Alex W.H. Chan. 2012. "Increasing The Competitive Positions Of Countries Through Employee Training". International Journal Of Manpower 33 (2): 144-158
-
Ahn, Ji-Young. 2016. "Top Executives’ Pay For Long-Run Performance And Corporate Governance". Journal Of Applied Business Research (JABR) 32 (2): 661.
-
Alagla, Saleh Ali F. 2012. The Role And Effect Of Corporate Governance And Remuneration Consultants On CEO Compensation. Durham University.
-
Conchon, Aline. 2011. "Employee Representation In Corporate Governance: Part Of The Economic Or The Social Sphere?". SSRN Electronic Journal.
-
Geiler, Philipp, and Luc Renneboog. 2015. "Executive Remuneration And The Payout Decision". Corporate Governance: An International Review 24 (1): 42-63.
-
Gelter, Martin. 2016. "Employee Participation In Corporate Governance And Corporate Social Responsibility". SSRN Electronic Journal.
-
Liu, Jinghui, and Dennis Taylor. 2008. "Legitimacy And Corporate Governance Determinants Of Executives' Remuneration Disclosures". Corporate Governance: The International Journal Of Business In Society 8 (1): 59-72.
-
"Understanding Agency Theory". 2019. Investopedia. https://www.investopedia.com/terms/a/agencytheory.asp.
Give your grades a boost
Just share your requirements and get customized solutions on time.
-
1,168,768 Orders
-
4.9/5 Overall Rating
-
5,052 Experts
