Question

Question 5.
Discuss whether regulatory action is necessary to fix “excessive” executive pay or
could a more appropriate compensation contract do the job.

Answer 1

Executive pay becomes talk of the town every year specially at the time of publishing financial results. Who is getting what, who is highest paid CEO and what sort of compensation is the executive getting.

Executive pay has been on rising trends over past few decades and therefore a demand to regulate that has also been raised by many section of the society e.g. fedral governments, media houses and general public.

It is common belief that executives are paid way more than their contribution in the earnings of the firm and in proportion of another worker in the firm.

Although, Investors and shareholders have been raising their concern on excessive compensation and severances paid, yet there is no regulation has been formed.

Therefore, we believe that a compensation structure for sernior executives drafted in line with firm's objectives would suffice. To limit excessive compensation, a wise proposal would be to have small portion of fixed compensation added with significant variable compensation which can be disbursed only after achieving certain measurable components for example to achieve $1bn sales target in middle east by end of 2021.