Executive Compensation: Issues of Great Concern - Essay Sample

Introduction

Executive compensation can be defined as the appreciation that is given to the high position leaders like chief executive officers, presidents, vice presidents and other highly recognized leaders of that caliber and it is given to them in exchange for the service they have given to a certain company or organization. It is a good thing to do for these leaders, but there are issues of great concern about executive compensation.

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Discussion

The big issue is that executive compensation is not given to all the employees or staff in the organization or company but only to the senior most members at the expense of the lower level staff. In this regard, therefore, to some extent, the executive compensation that is given to these high position staff members in an organization is unethical. It is true that it is a good way to motivate these people and appreciate them for their work, but if it is to work out well for these organizations and impact in a better way, then it should be given to all the employees of the company (Choi, 2011). The only thing that should differ when it comes to the provision of executive compensation is the percentage with which the compensation should be given to the respective levels of employees in the organizations.

When it comes to revising the executive compensation to make it better and just, the best thing would be either doing away with it in all employees or have it given to all the employees in any company so that all of the employees feel motivated and appreciated for the service they give to the company. Also, if the executive compensation will not be done away with, then it should be reduced in such a way that the senior leaders of the companies are not appreciated with a lot of cash and leave the rest of the employees in economic sabotage. The government itself has got a major role to play in making sure that executive compensation is fair (Choi, 2011). This should be done through serious passing of laws to reduce the percentage of executive compensation for the senior leaders in the organization and ensure that there are strategies placed to compensate the other lower employees for the services they provide.

Turning to Sarbanes-Oxley Act abbreviated as (SOX) that was formed and or put in place to safeguard the rights of investors and shareholders, it is just the right act. It is right because, in its provisions, SOX gives the rules and regulations that should be followed in both public and private companies to deal with fraudulent cases of finances and make sure that everything is in good order for the investors. For example, for the cash fraud scandal that took place in the Tyco Company, the act intervened in a big way to make sure that all the leaders who were involved in the fraud were charged for committing such a violation in their business (Lobo, 2006). In other words, all the restrictions and provisions that are found within the SOX act are good for dealing with the fraudulent cases those businesses and companies get involved in. The toughness of the act has made many of the senior stakeholders fear to engage in the looting of finances because they know clearly that the act will not favor them in any way upon being reported to have taken part in such a thing.

Conclusion

It is important to have good measures in place to deal with and control cases of financial fraud in companies and other organizations. Tough and or harsh laws will be good enough to eradicate this problem for good. What is not good and affects the financial standing of the organizations negatively should be done away with in all the ways possible.

References

Choi, T. H., & Pae, J. (2011). Business ethics and financial reporting quality: Evidence from Korea. Journal of Business Ethics, 103(3), 403-427.

Lobo, G. J., & Zhou, J., (2006). Did conservatism in financial reporting increase after the Sarbanes-Oxley Act? Initial evidence. Accounting Horizons, 20(1), 57-73.