Question

Q1. Discuss any three methods concerning how CEO’s Pay can be linked with performance. Elaborate you answer by providing example of each method.             

Q2. Starbuck is taking the following CSR initiatives:

“Now more than ever, the future of coffee depends on the healthy trees. More than 21 million trees have been donated to coffee farmers since 2015, to replace trees that are declining in productivity due to age and disease, such as coffee leaf rust. We are working towards a goal of providing 100 million climate-resilient coffee trees to farmers by 2025.”

Based on the provided information, develop an appropriate decision-making matrix

Decision making matrix	Sore 1-5	comments
Profitability
Purpose
Stakeholders
Efficiency
Benefits
Timeframe

Answer 1

The answer to the first question:

Question: Discuss any three methods concerning how CEO’s Pay can be linked with performance. Elaborate your answer by providing an example of each method.

Answer: CEO is the person responsible for the short term as well as long term growth of the company. It becomes very important to link the compensation of the CEO with the performance of the company. The three ways in which we can link the pay of the CEO to the performance of the organization as below:

1. Bonus: Bonus is part of the total compensation of the CEO and bonus depends on the performance of the company. Total Bonus portion should be divided into two halves in which the first half earning will depend on the growth in share prices and the other second half would depend on the financial performance of the organization.

2. Options: The part of compensation can be given in the form of options but there is a problem with the options. This options portion can lead to short term focus to increase the value of options. This could create a problem for the long term vision of the organization.

3. Stock Ownership: one of the innovative way which can ensure the short term as well as the long term objectives of the organization. The CEO compensation can have a share of total pay which needs to be used for the purchase of stocks with long term lock in to sell the same. This will lead to improving the performance of the CEO wherein the focus will be on balancing the short term objective and long term objectives.