In recent decades, share-based compensation has been increasingly used as a part of employee compensation. According to a survey conducted by SSR regarding the share-based compensation for companies in the S&P 500 index, the charts above shows that share-based compensation expense as a percentage of both selling, general and administrative expenses and total revenue increase substantially from 2005 to 2010. One of the main reasons is the changes in international accounting standard, which require all public companies to record share-based compensation expense on their income statement or balance sheet if settled in cash. Besides, the increasing trend also tells that there are several positive impacts of adopting the share-based compensation by those companies.
The first positive impact of employing the share-based compensations is to align the managers’ interest with shareholders’ interests, as public companies become larger and matured, the interests of shareholders and managers have diverged. According to Hannes(2007), share-based compensation can solve the agency problems between shareholders and managers, as it motivates the managers to act in the interest of shareholders by tying the compensation amount managers receive to the market price of the company stock, for example, if the manager helps the company to achieve a predetermined sales level or increase the share price, then the share-based compensation allows managers to share in the growth of the company’s stock price.
The second positive impact of employing share-based compensation is retaining talented employees. According to SSR (2011), the chart above shows that stock options is the most common type of share-based compensation used by the S&P 500 companies in 200...
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... to leave their existing jobs to join the company is offering them the share-based compensation, as it does not affect the company’s cash reserve. In addition, the firms can also use options as a currency to pay the operating expenses and supplies.
However, there are some negative impacts of adopting share-based payments to the companies. One of the main negative impacts is that stock options usually have very little downside risk for the recipients, which may encourage their risk-taking behaviour to influence share prices, and it can have adverse long-term consequences for share holders. Furthermore, according to Hannes (2007), stock-based compensation induces managers to conceal bad news about future growth options and to choose suboptimal investment policies to support the pretense. This leads to a severe overvaluation and a subsequent crash in the stock price.
Compensation is made of a base salary (paid by the hour, work or the year; excluding overtime or bonuses), variable pay (bonuses, profit sharing/stock options which work hand and hand with the performance of the company), and benefits (to include health insurance/savings plans – 401(k), or tuition reimbursement). The traditional way of determining base pay for jobs was to compare jobs in the same industry. Now industry and market, no long work by themselves, the current thinking is more person-based that considers knowledge, skills, and competencies of the work. This, however, is best suited for high-performing environments that remain flexible in their deployment of human capital.
that executive pay practice itself had a role in creating the financial meltdown. Furthermore, he thinks
Imagine being in a world where people are paid in cash bonuses, stock options, or generous severance pay when fired from their job due to a company merger, are asked to leave, or choose to retire. This happens to be a reality for many CEO’s and top executives of companies. We live in an economy where mergers and take over’s have become common, and to allow this option for the highest paid employees of a company is arguably unfair. While researching golden parachutes, I formed questions due to the circumstances surrounding this executive option. For example, why should CEO’s, who live very comfortably, be given a compensation package for losing their position due to a company merger or retirement when employee and shareholder’s futures are at stake? Is it fair for the rich to get richer when numerous employees below top executives are dealt the same fate from a merger and shareholders’ investments are at risk but neither receive a form of additional compensation? Of course, there’re those who support the issuance of golden parachutes, arguing they can persuade a possible company merger to not take place due to the costs associated with a top executives golden parachute package. Another supporting point for golden parachutes is, they can make it easier for higher up executives, like CEO’s be absorbed into the future merged company. I will be addressing the point of whether CEO’s and other executives deserve to be awarded a Golden Parachute option by their company. As well as a brief background of Golden Parachutes and my stance on them. They’re a very important part of our growing economy and will always be considered in a merger/takeover if awarded to executives.
In contrast , the shareholder theory organisations or organisation's decision-makers only have the responsibility to their shareholders by increasing the organisation profits and should only make the decisions to increase as much as possib...
Fair and equitable compensation is an important concern for all employers. To attract and retain employees, organizations must have an adequate compensation and benefits program in place. Employers go to great lengths in developing a compensation program so employees feel appreciated in the work they are performing. Job analysis and market studies are conducted regularly to compare competitor’s compensation and benefits programs. These studies ensure equivalency in pay by the job being performed, as well as paying skilled employees adequately.
It is concluded that neither of the above proposals are adequate in that any practical benefit that results from the proposal such as employee and shareholder engagement are outweighed by the theoretical impact of increasing the overlap of the organs which would alter the structure of company law. The legal side of directors’ remuneration appears to be sufficient with the directors’ duties legislation acting as an efficient preventative measure for the problems that directors’ remuneration creates. Furthermore, shareholders already must approve several payments as such this could be strengthened to tackle the issue and employees are to some extent taken care of within s172 as such it is these sections that need development rather than directors’ remuneration.
Corporations are looking for new ways to improve employee performance as well as remain competitive. Pay for performance is one method some businesses are utilizing to improve employee performance. Performance-based compensation exists when compensation is tied directly to that portion of an individual’s performance that can be effectively measured. There are a number of ways in which this may be accomplished and a number of examples as well how it is applied. One of the oldest examples is taken from the ancient Egyptians, where slaves working in the pyramids were given bread for superior performance. Payment of commission for sales production is one of the methods used today.
The above examples of pay show that the more skills, experience employees are with the organization the more they are compensated. Organizations would benefit by utilizing the same practice’s Disney extends to their workforces. For those businesses whose primary purpose of their plan is to only meet compliance requirements could greatly benefit by developing a comprehensive benefit plan. This could help increase their return on investment. The value I believe a business may gain from Disney’s compensation plan is to appeal to competent workers, to maintain those workers, and to motivate workers to direct their energies towards achieving the goals of the organization. Companies can set up policies to conduct a market study on a regular basis to implement a real performance appraisal system and then work on retaining good employees and elimination of poor performing workers. By following Disney’s lead of in obtaining those who best fit their company’s culture and supporting the company’s Mission. To guarantee that the pay structure is externally competitive, a pay survey should be shown. The results of a survey to be valid, the market pay data must be from the relevant labor market for each benchmark job. I would advise that a survey of regional and global pay data should be collected from the company, because for example, most of the office support, HR and operations jobs will be filled by local applicants. A job analysis is the procedure of reviewing jobs in an alike business. The result of this process is a job description “that includes the job title, a summary of the job tasks, a list of the essential tasks and responsibilities, and a description of the work context “(Burke, 2008). A job description consists of the knowledge, skills and aptitudes necessary to do the job. A job evaluation is the process of adjudicating the comparative value of job within a company
Remuneration management is defined as the sum received for an employment or service delivered, this includes the money received on a monthly basis as well as benefits given as rewards (investopedia,para.1 ). Individualism need to be taken into account when implementing these remuneration structures or reward schemes, equal pay plays a role in balancing earnings among the diverse workforce (Shen, Chanda, D’Neetto and Monga,2009,p.241). The Woolworth’s Holdings uphold remuneration policies which have the purpose of making sure to attract and hold on to the best talent, that they are congruent with the strategies of the company and are the determinants of performance during the short and long phases. The policy considers the board members and the employees. This policy manages employees of the company by giving...
CEO compensations are awards and incentives given to the chief executive officers of companies. These awards could either be in the form of cash or in non-monetary forms. For instance, some executives are awarded huge numbers of shares in a company or are allowed to purchase the shares on their own but at subsidized prices. The sum of reimbursement on compensation to any chief executive officer is decided on by the board of directors to that particular company (Sam Ashe-Edmunds, 2014). The last few decades have seen dramatic and outrageous rises in executive compensations. Currently, the amount of money paid to CEOs as compensation is close to two hundred times the amount CEOS were receiving in the 70s (WAGNER, 2012).
As per Martocchio (2017), “compensation represents both the intrinsic and extrinsic rewards employees receive for performing their jobs and for their membership as employees” (p. 3). Therefore, compensation structures should achieve three objectives: attract top talent, motivate employees to perform at a high level, and boost employee retention rates (Kulik, 2004). In the business development sector, all three goals are vital to maintain a competitive advantage and increase market share. For example, the fifty largest business development corporations only accounts for twenty-five (25) percent of the industry’s total revenue (Zacks Equity Research, 2017). Thus, to achieve these objectives and maintain a competitive advantage,
Holland Enterprises is on an innovative planned trend, to invite and maintain the utmost talented employees and to decrease opportunity. The Human Resource Department had the responsibility that has initiated a winning team with a different compensation strategy. The compensation strategy contains of financial pay, and in thoughtful rights of imports and amenities. Holland Enterprise employer’s duties guarantee that their drivers recognize that they are motivation, they obtain the implements they want to be effective in their employment with Holland Enterprises. Their obligation founds an idea and marks accurate potentials.
Employers are often faced with the challenge of looking for ways to boost productivity and profitability while at the same time, motivating employees to accomplish organizational goals. For many employers, variable pay plans have risen to meet this challenge. A variable pay plan ties pay increases to increased performance and productivity. One of the more popular group variable pay plans is called gain sharing. Under gain sharing pay programs, both the employer and the employee benefit from increased productivity. Therefore, gain sharing has often been referred to as a win-win pay program since it is an incentive strategy that ties pay to productivity. Gain sharing is a type of incentive plan designed to increase productivity by linking pay directly to specific improvements in a company’s performance. Gain sharing is used primarily when quantitative levels of production are important measures of business success. Gains are shared with unit/department employees on a monthly, quarterly, semiannual or annual basis according to some predetermined formula calculated on the value of gains of production over labor and other costs. The plan lets employees reap some of the rewards of their efforts through teamwork and cooperation and by working smarter and harder.
Therefore, the companies provide rewards to top-level managers who meet certain targets over periods greater than one year. The most common form of long term incentive is stock or equity based incentives (i.e. stock option). Stock option plan gives managers the right to buy the company’s stocks at a specific price and time in the future, encouraging top-managers to sustainably maximize the firms value. This plan could satisfy more needs than the short term incentives, namely physiological needs, safety needs, and esteem needs. By receiving these rewards means that those managers have achieved challenging targets, hence they gain respect from their subsidiaries, colleagues and even their bosses. Therefore, an effectively motivated rewards should include non-monetary incentives, such as autonomy, recognition or promotion, together with monetary rewards to fulfill individual needs.
The total pay package has a direct impact on the successful recruitment, selection and the retention of staff within any organization. This pay package is critical for any business to remain competitive in today’s business world. Competitive compensation packages are vital to both large and small organizations as they encourage the retention of talented staff.