Write a 4 page essay on Executive Compensation.Download file to see previous pages... Silva, published in the Journal of Managerial Issues in 2005 and "The corporate scandals and American capitalism"

Write a 4 page essay on Executive Compensation.

Silva, published in the Journal of Managerial Issues in 2005 and "The corporate scandals and American capitalism" by I. M. Stelzer published in the Public Interest in 2004.

Jim Manzi in his 2007 article takes a close look at the increases in executive compensation that have taken place throughout the last two to three decades from the cold war era to the information and globalization age that the world economy is currently operating in. Manzi analyzes the theory put forth by Peter Drucker in 1979 relating to the difference in executive compensation when related to that of the lowest paid individual in the same organization. Manzi in his study has used much secondary data that is available to the public regarding executive compensation and laid out his own reasons for agreeing with such pay scales. According to Manzi, the regulations that have been suggested by the federal government and the securities and exchange commission in the United States that shareholders should be given the power to approve or veto the pay of the executives should help to some extent, though it will not be the be all and the end all of the problem. According to him the disparities in compensation of the CEO and the lowest level worker will still continue even after such a measure is pushed through by law as shareholders will still not have the necessary information to make accurate decisions on the health of the organizations that they are investing in and will continue to put their trust in the executives who act as agents of the organization whose stock they own.

On the other hand, Silva in his article published in 2005 has carried out a research study on the relationship between board compensation and the approval of CEO remunerations. Most studies of this nature in the past have relied heavily on secondary data, however Silva in his study has relied on primary data that has been gathered from the boards of Fortune 2000 companies. It was Silva's opinion that boards approved large or sometimes inexcusable remunerations for their CEOs based on qualitative performance results that could be manipulated by powerful CEOs. His hypotheses were that there was a positive relationship between the use of qualitative data to measure the performance of a CEO and the salary of the board and a negative relationship between the use of qualitative data to measure the performance of the CEO when the board's remuneration consisted of stocks and equity in the organization. The primary data that was gathered proved these two hypotheses correct and therefore it was Silva's opinion that when boards were paid in stocks and equity they were more careful to use quantitative performance measures that could not be manipulated when evaluating the performance of the CEOs whose compensation they approved.

The final article that was used in this evaluation related to the different corporate scandals and mishaps that have taken place throughout corporate America in the past decade or so. Like Manzi, Stelzer too relied heavily on secondary data for the information and opinions put forth in this article. In this article it is Stelzer's opinion that executives are not fulfilling their roles as agents of the shareholders and that the shareholders have no way of knowing this or avoiding this situation.