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Change in Executive Compensation

Few recent years were known for the executive pay shift from the cash to stock options in a bid to link pay to performance. By the way, these actions led to the explosion of the executive pay that arises the question “Which sum is enough?”.

So it is important to clarify and understand what the executive pay is. And only then it is allowed to highlight the theory behind the increases in this pay as well as few arguments against and for these noticed increases.

So traditionally the straight salary was the typical pay packets for executives. Recently, executives received the comprehension on the form of an ordinary straight salary to which some certain extras were added. As for these extras, the next points were included into the list.

Firstly it is a bonus. It means the certain sum of money awarded if the special set performance criteria are met (is provided usually annually). Also, there are stock options. It is the option which allows companies to but stock at the proper price in future.

Bonuses and stock option are the main tools which are used for enhancing the performance. However, some variations are also existed and available. For example, the C. E. O. is enabled by the phantom stock plans to gain the benefits of shares such as appreciation and dividends while they actually own any. Such reload options enable the executives to see their options at the lowest prices, at the same time the shares are sold at the highest ones. Restricted stock awards are exercisable only in those cases when the performance criteria are met. Option swaps can be awarded when the prices for share drop and the re-negotiation of the contract must exist because of having a great importance. Such option swaps swap the initial stock options for creating lower prices for the options. For example, of course, parachutes from the gold are the large payment made for the chief executive in case of the termination of their contracts because of the take-over.

As for the reason, the question is what is the main reason of such change in compensation of executives? In fact, there are lots of reasons that have changed the format of the executive compensation. Firstly it is explained that the logic is simple behind the stock options. For example, if a C. E. O. were awarded stock options at the certain value, it would be in their interests to realize that the value of these stocks increases through the competent running and activities of this concrete company.

Few recent years were known for the executive pay shift from the cash to stock options in a bid to link pay to performance. By the way, these actions led to the explosion of the executive pay that arises the question “Which sum is enough?”.

So it is important to clarify and understand what the executive pay is.

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Assignment ID
100002682
Discipline
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CREATED ON
November 7, 2016
COMPLETED ON
November 8, 2016
Price
$50
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Essay Example Comments
aQasim157
December 10, 2016
aQasim157
very good
ankitstha178
December 8, 2016
ankitstha178
Great work. Thank You very much..
melodys3723
December 7, 2016
melodys3723
Great work from this writer