Executive Compensation and Page 2
Executive Compensation and Shareholder Interest
The compensation of the CEO (Chief Executive Officer), and other high level executives comprises a largo portion of a company’s payroll. It is often a topic of discussion between employees, owners and shareholders. Why is their compensation so high and why can it be viewed as controversial? The goal of the executives should be to maximize profits and secure the financial strength of the company. The question has been raised if some executives are looking to promote the best interest of their firms or the best interests of their own financial security. This raises the question of how to structure executive compensation to benefit both the executive, personally and professionally, as well as sustain the viability of the company.
Overview of Executive Compensation
During the mid 1980’s executives began receiving some of the largest compensation packages ever offered. Even during the recession in the 1990’s some executive packages continued to raise In October 1992 the Securities and Exchange Commission outlined new disclosure rules requiring disclosure of executive compensation in the proxy statements (Leonard 1994). In July 2006, the SEC again amended the reporting requirements of executive compensation Among some of the changes, it provides for one number to be disclosed for total annual compensation for each executive by name along with more detailed disclosures. As stated by John W. White, Director of the SEC’s Division of Corporation Finance, “…these disclosures be made in plain English” ( “SEC Votes to Ado ...