Outstanding Pledge of Administrative Indemnification - Term Paper Example

Name: Institution: Course: Tutor: Date: Introduction Executive compensation at times referred to as executive pay is defined as financial compensation that is received by officials of a firm. In most cases it includes a mixture of the official’s basic salary, bonuses, as well as shares of the company’s stock or call options of the same. Executive compensation is important corporate governance owing to the challenges associated in finding executives capable of motivating the workforce, communicating the organization’s vision as well as leading the organization to the top. The fact that a company’s performance is monitored by its investors increases the pressure of retaining qualified and competent executives who ensure that the company’s momentum of success is maintained. Consequently, executives are not only swayed by the compensation package but the unique and challenging opportunity presented thus qualified candidate have more negotiating power in today’s market. In this case executives bear the advantage of commanding a high salary while extra incentives are offered by companies to attract them in joining the companies in question (Bebchuk & Grinstein, 2005). It is on this regard that the thesis of this paper is built, executive compensation is not fair. In this, my views are in support of the thesis basis my arguments on concerns of the work input by the executives and the general workforce in light of the compensation they receive for it. The argument of the thesis is as well articulated on the importance that both the executives and the general workforce have in regards to the organization’s success. In addressing the thesis the paper discusses arguments that are made in support of the thesis as well as those made in objection of the thesis. The paper as well includes a conclusion by making a resentment of the thesis and summarizing the arguments. Arguments for thesis Executive compensation raises ethical concerns in the sense that it can influence unethical business practices by the executives. This is in the sense that the executives in question might result in making business decision that do not influence more the success of the organization but rather influence performance goals stipulated necessary for them to receive incentive pay. This is argued on the basis that if incentives are short-term, the executive might influence the company to making short-term profits that can not be sustained with the aim of receiving bonuses and leave the company before long-term financial implications arise. The use of stock options in executive compensation as well raises ethical concerns of illegal practices. This is in the sense that the executives can sell the company’s stock by misleading the public about the organization’s financial health while raising its stock prices (Bebchuk & Grinstein, 2005). Another ethical concern lies in the fact that executives owing to the executive compensation plan receive high pay as compared to lower-level employees whose pay rises at a very slow rate. The argument in this is that the executive compensation plan has influenced the widening of the pay gap between the executives and the typical employees. This is in the sense that the gap has dramatically widened to a point that the typical employees are under-compensated. The ethical concern in this is as well considerate of the work input offered by the typical employees while considering the importance that this work input has in influencing the success of the company. The argument is that while the executives are concerned with managing the company’s resources to influence its success, the typical employees convert the resources to the products that influence the company’s success. In this regard, the argument against executive compensation plan is posed in the sense that executive compensation leads to under-compensation of the typical employees in considering the input that the y make and it relevance to the company. Another argument is support of the thesis is the fact that the returns on investment from these pay packages is very poor in light of other outlays of corporate resources. The argument in this is the fact that the executive compensation plan influences the organization to lay much of its focus on executive compensation which has a negative implication to other resources of the organization (Bebchuk & Fried, 113). This is in the sense that while the executives are highly compensated for their contribution, the return on investment gained from this compensation is minimal as compared to other resources of the organization. This is especially with the human resource which in most case is demoralized by such arrangements resulting in strikes and boycotts that negatively influence the company’s success. Executive compensation as well sparks protests with share holders who have much influence in the company but have minimal say as regards the executive compensation. In this regard share holders deem executive compensation plans unfair in the sense that the executives are highly compensated for their contribution at the expense of the share holders. This is based on the fact that most of the funds of the company in question are utilized in facilitating the compensation plan thus reducing the company’s net profit which consequently influences the dividends that the share holders receive (Bebchuk & Fried, 113). Objections to thesis Companies face a challenge in finding executive employees capable of motivating the workforce, communicating the company’s vision and leading it to the top in the market. This is amid close monitoring of the company’s performance by concerned investors which increases the pressure of retain competent executives once hired. This has influenced a global war in respect to competition for competent executives while the rise of private equity firms changes the complexion of the competition. This is in the sense that it has increased the opportunities that executives have in regards to employment thus influencing the companies to use executive pay as an attractive aspect in the employment of competent executives. The argument offered in this is that executive compensation is fair in the sense that it helps the companies retain their talented and competent executives while giving them a competitive advantage in the market in attractive potential executive employees. Executive compensation is as well argued as a byproduct of demand and supply for executive talent. This is in the sense that executive talent is on high demand with the increasing number of companies needing it while its supply is rather minimal thus the use of executive pay as an attracting factor. It is as well an argument by the supporters of executive compensation that company executive have a greater influence in the company’s success on the basis that they coordinate the company’s resources towards the achievement of its vision. As such, they argue that executive compensation plans ensure that the executives are efficiently compensated for their contributions (Bebchuk & Fried, 154). Conclusion In considering executive compensation plans unfair, light is shed on the unethical practices that are likely to occur owing to the arrangement of the compensation plan. The argument is that it widens the pay gap between the executives and the typical employees which can result in unethical practices from both parties. Consequently, the return on investment from these pay packages is very poor in light of other outlays of corporate resources. This is in the sense that it is not only the executives that influence the success of the business but as well contributions from other resources. The general argument in support of the thesis is that executive compensation results in high pay for the executives, which is not the actual compensation for the contributions which is at the expense of the typical employees whose contribution has a significant influence on the company’s success. Those in opposition of the thesis argue that the nature of the market influence competition for talented executives competent of coordinating all the organizations resources to foster its success thus the use of executive compensation as an attraction aspect. They as well argue that coordination of the company’s resources in vital in influencing its performance that justifying executive compensation. Both arguments on the thesis have an impact on the future trends of executive compensation. This is based on the fact that it has had serious implication of corporate governance raising the concern of governments in ensuring that the individuals are effectively compensated for their contributions. It as well influences the nature of compensation that the executives receive in respect to the unethical practices that may arise. Works cited Bebchuk, Lucian. & Grinstein, Yaniv. The Growth of Executive Pay. 2005. Viewed April 04, 2011 from . Bebchuk, Lucian. & Jesse, Fried. Pay Without Performance: The Unfulfilled Promise of Executive Compensation. Harvard: Harvard University Press. 2006. Read More