How Much Should You Pay Your Top Executives?

1. 

Executive compensation funded at its various parts which include salary, stock options, and severance packages funded at the current level is unethical. Executives in different companies are receiving awards and incentives in the form of cash and shares for their performance in a company. From the 1960s, executives were getting higher payments which included the executive compensation as compared to the employee’s salary. In my opinion, this was an unethical step that was brought about by social and political changes which give executives a higher power over their own payments leading to the inferiority of workers. 

For example, it is unethical because many executives are taking unnecessary risks and illegal behaviors to increase the profits of the company which makes their performance higher. This includes corruption, taking other people's projects by force, and even mistreating employees to work overtime without a valid reason. When the performance is higher, the company rewards the executives a compensation that was unethically earned. 

In another example to support my unethical point of executive compensation is how they have risen from the 1960s up to date. Executive compensation keeps rising dramatically in many countries. According to the Economic Policy, CEO compensation rose by 937% between 1978 and 2013 whereas the employee compensation had been increased by only 10.2%. Moreover, in 2007, the Economic policy showed that the world' highest-paid CEOs and Chief Financial Officers were Americans and they were making 400 times more than the typical employee. These statistics show that most of the executive compensation is a personal benefit and is a liability to a company. 

I would revise the compensation to make it just by structuring it in that there is a separation in the ownership between shareholders and management control as this will remove conflicts of interests between the shareholders and executives. The executive compensation is composed of the basic salary, perquisites, stock options, long and short-term incentive plans, and restricted stock. The revision that I will make will narrow their executive compensation to stock options, bonuses, and restricted stock function. I would make this change on the basis that executives cannot diversity any risks across the company. The government cannot help in this matter as long as the company is paying their taxes, and thus only the board of directors can reduce the executive compensation. 

2. 

The Sarbanes-Oxley Act (SOX) is an act containing 11 titles, and it was enacted in 2002 to curb issues of corporate and accounting scandals which were being encountered by many companies. The bill is just right because whenever a company faces these scandals, investors lose billions of dollars when their shares collapse. Moreover, the scandals make the US residents not to be confident with the US security markets as it proves instability. The Act ensures that top management executive individually certifies that they are accurate financially. 

The 11 titles of the Sarbanes-Oxley Act include: 

Public Company Accounting Oversight Board (PCAOB) 

Auditor Independence 

Corporate Responsibility 

Enhanced Financial Disclosures 

Analyst Conflicts of Interest 

Commission Resources and Authority 

Studies and Reports 

Corporate and Criminal Fraud Accountability 

White Collar Crime Penalty Enhancement 

Corporate Tax Returns 

Corporate Fraud Accountability 

These titles have sections which all work to ensure that a company is in a way to be financially stable and accurate. An example as to why the Sarbanes-Oxley Act is just right is that it provides a company with many cost-benefits. The Act has helped to reduce the compliance costs of companies, and it gives any advanced warning of the possibility of future accounting problems. Moreover, the SOX Act has lowered the borrowing cost of companies, and it has helped companies improve their financial statements and internal controls. The Sarbanes-Oxley Act was a significant bill to be passed as it has helped many businesses grow and it has assisted in identifying fraud companies.