Executive Compensation: Getting Out of Hand - Research Paper Example

Through a review of the existing literature, the subject was studied and conclusions are drawn. Literature was reviewed on different perspectives as well as the regulations and the legislation. Examples from the corporate world helped to corroborate the findings. Recommendations on how compensation can be restricted have been laid out, followed by limitations to the study.In recent months, executive compensation has been scrutinized in the United States more than ever. The Enron debacle and the Global Crossing bankruptcy highlighted the huge compensations that the directors and the CEOs receive (Brick, Palmon & Wald, 2006).

Companies appear to be reckless in the number of bonuses they allow despite the past and current economic conditions. The public concern about the CEO pay is about fairness, about the disproportionate distribution of wealth (Locke, 2008). The CEO compensations practices have come under a sophisticated and withering attack in recent years (Walsh, 2008). This demonstrates a weak corporate governance structure as the board fails to effectively monitor the firm’s management. In the current economic recession, CEO compensation has gained more importance and needs to be curbed.

Therefore, this paper will provide a comprehensive description of pay practices (and trends in pay practices) over the past 20 years for chief executive officers (CEOs). The topics that will be discussed include the level and structure of CEO pay (including detailed analyses of annual bonus plans, executive stock options, and option valuation), international pay differences, the pay-setting process, the relation between CEO pay and firm performance, the politics of CEO pay, & possible solutions for this problem.