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essay 1250 words 3 references
compensation committee needs revamping
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Running Head; Executive Compensation Plans and Devices
Executive Compensation Plans and Devices
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Executive Compensation Plans and Devices
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Executive Compensation Plans and Devices
Executive compensation varies significantly from the typical pay package for the salaried
professionals or hourly workers in the sense that the executive pay is majorly biased toward
rewards for the organizational results and performance. Intuitively, if a company performs
poorly, then the executives receive a small portion of their potential pay. Contrary, if the
company performs optimally and meets its annual objectives, the executives receive larger
payouts. Executive pay is usually structured in a way to ensure that it rewards company
performance and it aligns the executive pay with the shareholders’ value. The executive pay is at
risk since it is pegged on the general performance, as well as on the metrics that are determined
subject to the organizational standards and programs that are set and implemented by the
compensation committees.
The roles of serving in a compensation committee have increased considerably especially
with the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010, and the mandated say on pay governance enhancements (Douglas & William, 2014).
Compensation committees act on behalf of the board and have the responsibility of overseeing
the executive compensation within the operational provisions and organizational standards.
These committees play different roles such as the setting of the pay rates for the senior level
management, and may also be involved in the determination of additional compensation plans
such as additional perks, profit sharing, bonuses, and stocks. The rising complexity in the
executive compensation landscape has significantly led to the rise of multiple challenges in the
operational frameworks of compensation committees requiring a constant evaluation of the
personnel and roles to ensure that the initial objectives are met effectively. Typically, a detailed
Executive Compensation Plans and Devices
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understanding of the fundamental roles of these committees as well as the best pr...