Question

One of the more controversial issues facing corporations today is the issue of executive compensation. Make an argument for the current state of executive compensation being okay and an argument in favor of regulation to reduce executive compensation. Base your arguments on the concept of shareholders and wealth maximization. After considering this would you be in favor of regulations?

Answer 1

Issue of executive compensation have been subject of major debate because executive compensation is excessive in relation to the compensation of other employees in the organisation and it is leading to promotion of a discriminatory policy in order to pay the executive with such hefty sum which cannot be justified even after he is making so much of profit for the organisation because compensation of a few individuals at the top is higher than the combined compensation of the rest of the organisation and shareholders are always having an issue with that because this compensation cannot be justified as this is creating a discriminatory policy and this is also leading to inequality among the organisation and this will also lead to the satisfaction among other employees so there need to have a proper regulation in relation to the management compensation in the organisation.

An organisation can justify paying higher executive compensation because these executive are leading to formation of policies which are determining the higher shareholders value in the long run.

Organisation should be against higher packages to the executive because it is promoting discriminatory policy and it is also the money of the shareholder which should not be expensed in such a manner.

There should be a proper compensation package as the goal of organisation will be to pay the the managers a healthy compensation but not such excessive compensation that it is leading to a conflict of interest with the shareholders principal motive of shareholder wealth maximization and organisation should always be trying to focus upon protecting the interests of all the stakeholders and they should be trying to pay all their employees in an equal performance based payment rather than just paying the chief executive officers with hefty sum of money.

I would be advocating for implementation of a regulation because regulation will be keeping the compensation in check and it will also lead to proper equality between various stakeholders in the organisation and it will also mean that there will be a promotion of equal and fair policy between various employees and it would be leading to higher satisfaction among shareholders also because more of the money could be expensed for the purpose of the business rather than just expanding it for the executive compensation.