Current Controversies in Executive Pay Compensation - Annotated Bibliography Example

CURRENT CONTROVERSIES IN EXECUTIVE PAY COMPENSATION By Location There has been an existing controversy surrounding executive compensation. Some critics have argued that American chief executive officers receive more than they deserve compared to the compensation by other employees. With the increasing competition in the market, many companies are determined to offer chief executive officers remarkable compensation packages so that they can attract talent and retain it within the organization. Many researchers have focused on understanding the factors that should determine the executive pay compensation. There are issues raised concerning the performance chief executive officers and whether it conforms to the level of compensation, they receive. Moreover, many organizations justify the pay they give to their executives with the fact that in a free market, companies can act on their will and compensate their employees effectively. There is a salient need to consider the legal aspects that surround the executive compensation in the process of determining an effective compensation plan. Many authors have addressed the issues and controversies surrounding executive compensation and developed reliable guidelines that can help organizations determine effective and compensation structures. Many organizations argue that the value brought to organizations by the chief executive teams justify the compensation they receive. The chief executive officers are tasked with responsibilities of creating value to the business and developing business strategies that determine the success of an organization. Therefore, the compensation received by the executives should be aligned to their performance and responsibilities. CURRENT CONTROVERSIES IN EXECUTIVE PAY COMPENSATION American Bar Association 2011, Executive compensation, American Bar Association, Joint Committee on Employee Benefits, Washington, D.C. SUMMARY The book presents a critical analysis of executive compensation and the factors that determine how much the executive should earn. The book presents a realistic approach from a legal perspective on why executives deserve the compensation they receive. Because the executive team has weighty responsibilities, the American Bar Association has the conviction that they deserve a remarkable compensation. ANALYSIS The book is relevant to the given topic because it presents the legal perspectives of executive compensation. From the book, readers can gain an in-depth understanding of the numerous factors that justify the pay accorded to executives. More detailed analysis: The book highlights the specific reasons that justify the pay received by the executive team (p. 34). The book places emphasis on the free market aspect and outstanding talents and achievements of chief executive officers, factors that emphasize their need for a hefty pay (p. 35). Armstrong, M, & Ann C 2011, The reward management toolkit a step-by-step guide to designing and delivering pay and benefits, Kogan Page, London. SUMMARY This book provides a systematic guide on how organizations should design compensation plans. The authors recognize the value of developing an effective compensation plan to ensure that the workforce remains motivated. The authors analyse the critical tools that can help organizations develop an effective compensation plan. Aspects such as design, development and implementation, as well as other considerations such as the strategic rewards, market rates, and benefits options are also emphasized in the text. The authors highlight that organizations should consider different factors when developing the most effective compensation plan for the executive team. ANALYSIS The book proves to be a reliable source for the topic because it presents a systematic guide that helps organizations design compensation plans for the executive team and other employees. The authors have simplified the approach to developing compensation plans by adopting this approach. Therefore, readers can benefit immensely from the aspects presented in the text. More detailed analysis: The book gives attention to the remuneration of executives and the most effective guidelines that should be used (p. 173). The book presents a discussion on the importance of carrying out a market analysis prior to developing the compensation plan, which is a good idea that can benefit many organizations (p. 95). Balsam, S 2002, An introduction to executive compensation, Academic Press, San Diego. SUMMARY The book offers a critical introduction to executive compensation. Specifically, the book presents readers with an objective based analysis of the existing compensation practices in American companies. The book allows readers to gain familiarity with a diverse range of academic literature as well as the existing practices. To ensure that all the readers understand the compensation practices, the author presents illustrations of the various components included in the compensation package. ANALYSIS The book is a relevant source for the given topic because it allows readers to gain an in-depth understanding of how executive compensation should be designed. The book highlights the different systems involved in giving incentives, financial reporting, taxation systems, as well as firm value effects. More detailed analysis: The book presents the role of the agency theory and its importance in executive compensation (p. 6). The book offers a critical consideration of other theories that determine executive compensation (p. 7). The book presents a critical analysis of the external factors that affect executive compensation (p. 8). Ferracone, RA 2010, Fair pay, fair play aligning executive performance and pay, Jossey-Bass, San Francisco. SUMMARY The book presents a critical analysis of how executive performance and pay should be aligned with different organizations. The book places emphasis on the need for organizations to give a fair pay for top performing executives. The author presents a significant database of understanding how executive pay should be determined depending on the company performance, its revenue, as well as the industry it operates in. Moreover, the author augments her arguments using real life stories as well as different perspectives and insights that explain how executive pay should be determined. ANALYSIS The book is a reliable source for the development of the topic because the author has over 20 years experience in research on executive compensation. Therefore, the ideas presented in the book are based on research of over 44, 000 companies as well as real life stories. For this reason, the book presents a realistic approach to determining the executive compensation. More detailed analysis: The book gives special attention on aligning performance and compensation, which is an effective approach in determining executive pay (p. 43) The book gives attention to some of the factors that have contributed to a misalignment of the performance of executive teams and their pay (p. 113). Graham, M. D, Thomas A. R. & Dawn D 2008, Effective executive compensation creating a total rewards strategy for executives, AMACOM/American Management Association, New York. SUMMARY This book offers a practical guide as well as a complete methodology for offering motivation to the management team so that it can achieve the organizational goals. The book provides an in-depth discussion of how executive compensation should be determined. Worth noting is the fact that the authors recognize that one-size-fits-all approach should not be adopted in every organization. On the contrary, different organizations should develop effective strategies of compensating the executive team depending on their key stakeholders, business strategies, organizational capabilities, as well as the environment. As long as the approach adopted benefits both the company and the employees, it is justifiable. ANALYSIS The book is a reliable source relevant to the topic. Upon a critical examination of the book, I realize that it offers case studies as well as examples that serve to illustrate the points discussed. The case studies and examples make it easier for readers to understand the text. More detailed analysis: The book presents a critical total reward architecture that can be used by organizations in determining how much the executive should earn (p. 189). The book offers a detailed methodology on how to calculate the base salary for each employee (p. 241). Kay, I. T & Steven VP 2007, Myths and realities of executive pay, Cambridge University Press, New York SUMMARY The book presents a critical analysis of the myths and realities and analysis of the executive pay. The authors recognize that issues surrounding the executive compensation have so many myths surrounding them. According to the author, many Americans are yet to face the realities of executive compensation. The book investigates whether executive pay conforms to the performance of the executive team. Moreover, the book carries out a critical analysis of determining whether adopting a performance-based model can serve to promote value for shareholders and organizational growth, as well as present benefits to the workers. ANALYSIS The book proves to be a reliable source for the development of the paper because it highlights the conflicts of interest that surround executive pay. Moreover, it presents the views of different stakeholders and financial analysts concerning the models adopted in compensating the executive team. More detailed analysis: The book analyses activity-based compensation, which is a good approach in determining the salaries of the executive teams (p. 128). The book highlights the purpose of giving consideration to stoke values when compensating directors (p. 132). Smith A 2007, Executive Pay Controversy, Accessed 23 June 2015 http://www.businessknowhow.com/growth/ceocompensation.htm SUMMARY The article presents a critical analysis of some of the reasons that justify the compensation received by executives in organizations. According to the author, the fact that organizations operate in a free market means that they are free to pay their chief executive officers as they wish. Also, the unique talents exhibited by the executive teams justify the pay they receive. Moreover, the author highlights that executive teams play a critical role in the creation of jobs, investment opportunities, and innovations that changed the world, a factor that justifies their compensation. ANALYSIS The article is a credible source for the topic because it outlines some of the reasons why the executive deserves the compensation they receive. Unlike the criticism of many Americans, the executives play critical roles not only in the company, but to the society and exhibit unique talents that justify their compensation. More detailed analysis: The article highlights that chief executive officers have a demanding job that involves leading and inspiring over 10,000 people and creating value. The article emphasizes the free market aspect that justifies organizations to pay their executives as they wish. Wharton University of Pennsylvania 2007. Current Controversies in Executive Compensation: ‘Issues of Justice and Fairness’ Accessed 23 June 2015 http://knowledge.wharton.upenn.edu/article/current-controversies-in-executive-compensation-issues-of-justice-and-fairness/ SUMMARY The article discusses some of the controversies in executive compensation specifically the issues of justice and fairness. The article lays the blame on corporate boards that have the responsibility of determining how much the executive team should earn. The author argues that some corporate boards lack the expertise required to develop effective compensation plans. The article presents a realistic view that the executive pay has increased over the years but it does not different from the increased registered in other professions. The fact that organizations need talent compels them to pay highly if they are to maintain talented chief executive officers. ANALYSIS The article is relevant to the topic because it discusses some of the controversies that surround executive compensation. Moreover, the article offers a realistic view of the factors that determine the level of compensation. More detailed Analysis: The author is keen to highlight that the increasing competition for talent contributes to the increasing executive compensation. Read More