Monday, April 26, 2010

Executive Compensation

While reading chapter 18, I came across a section which discussed executive compensation and how it is causing outrage amongst some shareholders. Executive compensation has gotten carried away and some companies are looking to their shareholders to approve the executive-pay practices before putting them into effect.

Because shareholders essentially own a small stake of the company, it is important to recognize their opinions. The price of their stock is dependent on upper managements ability to perform and if they are unimpressed, upper management would receive a less significant bonus.

It is my opinion that executive compensation is way out of control. In this recent recession we witnessed executives receive bonuses for "hard work" even though they ran the company into the ground. By giving shareholders a voice in compensation practices, I believe it will encourage management to earn their bonus rather than wait for them.

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