Executive Compensation

Ethics and Globalization: MGT 5253

Case Study #2 – Executive Compensation

November 1, 2015

While the dismissal of Bill Hogson from General Global elicited much negative media attention and dismay from shareholders advocacy groups, the “golden parachute” he received is neither new, nor uncommon. His replacement, former CFO Janice White, in stark contrast to Hogson’s pay plan, requested her compensation be based solely on performance. Either arrangement precipitates much debate in how executives should be adequately and fairly compensated. In today’s competitive global landscape, businesses are compelled to pay top executives exorbitant amounts under the pretense that their salaries must be high enough to attract and retain top talent for those positions, and for their undertaking the responsibilities that come along with them. In practice neither extreme necessarily aligns shareholder interests with business performance and compensation. Businesses would do well to blend their compensation models to balance the value of top-tier executive management with responsible, company-first pay plans.

Hogson’s resignation from General Global wasn’t what brought so much blowback, but rather the immense $100 million he walked away with after such a short and maligned tenure. No one would argue that Hogson deserved $100 million for ineffectively managing General Global for one year, but who is to blame for such an enormous windfall despite his failure? According to a 2014 article in FORTUNE magazine, Claire Zillman writes that golden parachutes for CEO’s have actually been decreasing since the 2006 SEC proxy disclosure requirements went into effect, as well as the “Say on Pay” provisions outlined in the Dodd-Frank Act of 2010. The proxy disclosure requirements state that publicly-traded companies must disclose to shareholders the potential value of CEO exit packages, while the “Say on Pay” initiative affords shareholders a vote on CEO compensation, albeit a...