Submitted by: Submitted by financial
Views: 655
Words: 2490
Pages: 10
Category: Business and Industry
Date Submitted: 02/06/2011 08:19 AM
Executive Compensation and Corporate Governance
Executive compensation packages have increase dramatically over the past decade, and the public is outrage over the soaring CEO compensation package. The ultra-high base pay of most CEO may be a few hundred thousand but when bonus and stock options are added, it is well over ten to twenty times more than their base pay. Are top executives been overpaid, and what can be done about it? Do executive compensation figures reflect an efficient market, or a failed one? Are pay levels adequately disclosed? Should shareholders have more say?
It is reported that there are some hedge fund managers that make $500 million a year or more through arrangements that typically bring their firms 20% of the fund's annual profits, plus yearly fees of 1% to 2% of the assets under management. That kind of compensation will turn those executives into billionaire pretty quickly. And there are those Hedge Fund managers who have earned in excess of a billion dollar per year. Wow! This seems to be outrageous, as this kind of money could feed an entire third world country for the year. The Hedge Fund industry had little if any transparency and they were at will to do whatever was pleasing in their eyes. Somewhat more transparency exists at publicly traded firms, leading to considerable controversy in recent years as critics saw executives getting richer while pay for lower level workers remained relatively stagnant. On the internet and other media outlets, there are reports that show that compensation for big company CEOs was more than 400 times the pay for average workers last year, up from a 42-to-1 ratio in 1980. If the minimum wage had gone up at the same rate, it would have been more than $22 an hour in 2006 instead of $5.15.
A business can be undermined when the ratio of executive pay to worker pay gets too high. I don't know what the magic number is, but if it gets too high, it has an adverse impact on the ability of the person...