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Ethics Of Compensation Essay

683 words - 3 pages

The issue of ethics in the corporate world has been widely talked about over the last decade. Corporate scandals almost seem like a part of everyday life. The nation’s response is to inform students of ethical conduct and hold organizations to a higher standard. This will hold CEOs and management responsible for all fraudulent acts committed by an organization. The ethical spotlight has now turned to CEO compensation due to the recent decline in the economy.

The focus point of those public discussions has been to try and get a better position to influence CEO compensation packages. Determining a CEO compensation package and commitment that does not place undue pressure on the CEO to taint ...view middle of the document...

If the supply of the commodity increases, the value of the service declines due to the abundance and competitive pricing. The position of an executive is not one that can be easily filled as it requires a certain degree of skill, experience, and knowledge of the industry resulting in a low level of supply. As demand for executives began to rise, firms increased their compensation packages in an attempt to keep talent within their firm
Companies choose top executives’ compensation plans in different ways. The larger the market capitalization of a firm, the larger that company’s CEO compensation will be. Companies need to have an income gap in the different levels in the company. For example, executives should receive more than managers and managers should get more than regularl employees.

The majority of CEO and management compensation comes from stock options. This allows the CEO to purchase shares in company stock at a set amount that can be significantly lower than market value. Stock options can create an environment conducive to unethical behavior. Stock options present short term...

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