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Instructions for Bailouts College Essay Examples

Title: Bailout and decision making

Total Pages: 6 Words: 1838 Bibliography: 0 Citation Style: APA Document Type: Essay

Essay Instructions: Hi, I will be sending a .doc file containg the research I have done thus far. It is primarily in point form and some of it may be incoherent (you can e-mail me if anything needs clarification). The essay needs to cover three major points in its body (as stated in the .DOC file)

(1) Should the U.S. government now consider a bailout for the casino industry -- not to help the industry, but to save all those American jobs, which is the rationale for bailing out the auto industry (about 1 page, but could be intermingled with the other two questions)

(2) What is the single most important application of Pfeffer’s article to the growing call from corporations to readjust payroll costs? (about 1 ½ pages)

(3) Identify the most likely defects in decision-making that we should avoid making when it comes to the issue of public bailouts of troubled corporations? (about 4 pages)

I can be emailed to help with the report as needed.
There are faxes for this order.

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Essay Instructions: Need an example paper that follows the bailouts of Chrysler and GM. Where are they now? How were they similar? How were they different? What auditing violations caused by both companies to file bankruptcy? Who were the auditors? Was the probability of bankruptcy disclosed in the annual reports? In the notes to the financial statements? What type of opnion was given in the audit, unqualified audit opinion, with an exception? What were the repercussions to those firms, if any? Why or why not?

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Title: legalizing marijuana will boost the economy

Total Pages: 5 Words: 1620 References: 7 Citation Style: APA Document Type: Essay

Essay Instructions: Needs to have 2 visuals, 7 sources, APA format. I have inclded my rough draft so that it can be incorporated and made better haha. This paper is due on sunday, July 5.

With today's economy, we see legislators and government officials scramble to find
a solution for the economic crisis we have at hand. We have watched as we have had
to resort to very expensive bailouts, and still have not even been able to reform our
situation. Our national debt is rising and what we need a is a low maintenance and
cost resource, an efficient profit product like marijuana, that will boost the United
States economy and bring many benefits to it's users. In this paper, I will break
the negative stereotypes attached to marijuana, explain the stimulating effects it can
have on our economy, and how the war on drugs and our overcrowded prisons can
be rectified.
Legalizing marijuana will help boost our economy and reduce crime tremendously.
Marijuana has many useful benefits. With the economy in one of it’s worst
conditions, we need something that will boost consumer spending and help us keep
our money in our pockets without needing to constantly raise taxes to compensate
for our debt. The legalization of marijuana would create new jobs in the United
States. With unemployment skyrocketing, this would be an amazing opportunity for
those that lost their own. With designated areas designed for growing and shipping
marijuana, selling, and packaging, thousands of jobs would be open to prospecting
employees. Distributing marijuana would also help the state governments with tax
applied to purchases. With a hypothetical regulation tax, of anywhere between half a
dollar to a dollar, the government could make money while controlling the use and
lower potential cases of abuse. The tax alone would fundraise the government of
around 2-6 billion dollars in just one year. This is just from the regulation tax. With
other cumulative taxes imposed the government could be raking in anywhere
between 24 to 43 billion dollars in only one year.

With highly addictive products like alcohol and tobacco available, marijuana actually
turns out to be a much safer choice. Billions of dollars are spent on the
consequences and health issues relating to alcohol and tobacco. Marijuana is actually
proven to be medically helpful in itself. Alcohol and tobacco have been proven to
cause various health issue and cancers. Because of the highly addictive nature of
these substances, abuse and addiction become inevitable, and effects a tremendous
amount of people all over the world. Marijuana does not have any serious health
issues linked with it, and has been proven to not be physically addicting. Marijuana
has been labeled the “gateway drug” unjustly. Marijuana got its stigma because it is
a common substance that people use even though it is against the law. When people
try marijuana and realize that it is not the big deal that was once thought, they
sometimes tend to experiment with other drugs trying to investigate other
misconceptions. Typically, people who have used marijuana already consumed
alcohol and/or tobacco previously, making these the real gateway drugs. Alcohol and
tobacco cause families to be destroyed, and cause millions to be spent on treatment
and cancers.
Legalizing marijuana will definitely reduce crime. Law enforcement spends billions
on marijuana related offenses and prevention. This is money going to waste, and jail
space is being taken up by people who do no violent crimes. Jail space is becoming a
problem, and the overcrowding is causing violence to strike out within the prison.
Freeing some of the non violent offenders will save time, money, and space, and
decrease crime within. Marijuana drug deals would not happen, because of it being
illegal it prevents people from buying in safe conditions sometimes. With drug
dealing, much violence and criminal activity erupt, and these dealers will be shoved
out of the picture.
Marijuana has many beneficial factors, unlike legal substances like alcohol and
tobacco. Cancer patients reek marijuana’s benefits when they are battling constant
nausea. Marijuana successfully subsides nausea in cancer patients struggling with
chemotherapy, and helps them to attain an appetite to stomach food. The research
points to marijuana treating glaucoma which is a disease that causes one to go blind.
By taking marijuana it helps decrease intraocular pressure which is the cause to the
glaucoma. In the state of California, anyone 18 years and over is allowed to attain a
medical medicinal card for all different kinds of afflictions. Asthma, anxiety,
insomnia, bulimia, and migraines are among just a few conditions that marijuana
successfully has been proven to medicate. In the Los Angeles area, there are over
500 working marijuana stores to purchase medical marijuana from. With this state
law, marijuana smokers can be self assured they are not getting marijuana with any
impurities and they are not compromising their record by purchasing it at a legal
store. These stores have generated over 500 million dollars. With nationwide
legalization we can generate a bigger income than that.

With a depression slowly becoming a reality here in the United States, we need a
solution that will keep American hard earned money in our pockets. We need to
stop handing out bailouts that we can not even be sure will help or keep a business
afloat. With the legalization of marijuana we will be able to hack away at our debt,
stimulate the economy, bring patients relief, and save time money and energy on the
war on drugs and our overcrowded prisons. With the taxation and the opening of
new jobs we will be able to achieve more and generate more income to stabilize the
economy. Jobs will open up to the rising unemployed. Unlike alcohol and tobacco,
marijuana has medical benefits that can bring relief to human conditions, and has
been proven to help glaucoma and many diseases. With the legalization there will be
less crime. Less drug deals that lead to shady situations, and less likelihood of getting
impure marijuana. We will save billions on the war on drugs on marijuana related
arrests, while instead, generating an enormous income from providing it. It is time to
take a better look at marijuana, and what it can do for us and our country.

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Title: see specifications

Total Pages: 1 Words: 444 Works Cited: 0 Citation Style: MLA Document Type: Research Paper

Essay Instructions: Please read the following articles before responding to the questions:


Are Top Executives Paid Too Much?

Over the past decade, the rise of executive compensation has truly been thought of by
many as out of control. Peter Drucker, the famous management author, once said, "I have often
advised managers that a 20-to-1 salary ratio between senior executives and rank-and-file white-collar workers is the limit beyond which they cannot go if they don't want resentment and falling morale to hit their companies." Executive compensation continues to receive intense examination from many directions, including directors, shareholders, academia, the media, regulators, and lawmakers. Evidently Drucker's advice has not been followed. In 2004, the ratio of chief executives’ compensation to the pay of the average production worker jumped to 431-to-1, up from 301-to-1 in 2003. If wages overall had risen at the same pace as that of CEOs since the 1980s, the average worker today would be earning more than $184,000 a year rather than today's not quite $27,000, and the minimum wage would now be almost $45 an hour. And, the trend appears to be continuing. The 2006 Total Cash Compensation Report released by ERI Economic Research Institute and the Wall Street Journal’s revealed that the total cash compensation received by America's highest-paid executives exceeds 2005 levels by 41.3 percent.
According to Paul Hodgson, senior research associate for executive compensation at the Corporate Library, a watchdog group, executive benefits and perks increased 130 percent over the previous year. Half of the CEOs in the S&P 500 had amassed $2.6 billion in retirement packages. "What we didn't realize was that so many other people were getting them because they weren't disclosed."
A Watson Wyatt Worldwide survey of 55 institutional investors managing a total of $800 billion in assets shows that 90 percent of investors think executives are overpaid. Further, 64 percent believe that executive compensation is not fully disclosed. The need for rational compensation decisions seems imperative, especially since the collapse of Enron and other firms, in which top executives pocketed enormous sums in shady deals.
The business and regulatory environment has chanqed, and many organizations are rethinking executive compensation practices, including pay, bonuses, and severance pay. The Securities and Exchange Commission (SEC) changed the proxy disclosure rules. Companies are required to
provide additional information, such as the change in the value of the executive's pension and
earnings on nonqualified deferred compensation. Performance assessment and accountability are
the leading trends. Usually, shareholders do not object to high compensation for top executives
when their firm is profitable. In fact, they generally feel it is essential to reward them highly to retain them. As Jeff Miller, a partner at Redpoint Ventures who has served on several corporate boards, said, "If you think your CEO is doing a good job, pay him accordingly. If not, get a new one."


As the economy tanks and rank-and-file workers lose income, security and jobs, executive pay has again become the focal point of public anger. The pay gap between the most affluent executives and the average worker yawns wide. Last year, Standard & Poor’s (S&P) 500 chief executive officers averaged $10.5 million a year, 344 times the annual pay of typical U.S. workers. By contrast, the ratio is 22 in Britain, 20 in Canada, and 11 in Japan. Now, U.S. stakeholders are zeroing in from all sides: Shareholders are pressing for "say on pay," the president signed the American Recovery and Reinvestment Act of 2009, and regulators are setting disclosure requirements and pay limits for executives whose companies feed at the taxpayers’ trough.
It’s hard for people making $12 to $18 an hour to understand why these executives are making such outrageous numbers, says Stephanie McNeil, SPHR, human resources director for the town of Franklin, Mass.
"The publicity has made our people more skeptical," observes Steve Browne, executive director of HR at LaRosa’s Inc. in Cincinnati, a 1,400-employee pizza franchiser. "We play by rules that everyone agrees are fair. Every role has a certain value with pay based objectively on performance. When our workers see others who don’t operate that way, they find it confusing and upsetting."
HR managers are struggling to handle divisiveness and anger generated by executive pay excesses. But in the rush to judgment, don’t overlook the complex issues of risk, responsibility, effective incentives and the burden of leadership factored into executive compensation.

Dirty Linen

In 1991, grumbling about CEO pay led to reforms requiring more reporting and limits on deductibility. Now, that government intervention looks tepid: In late January, when media revealed that bankers had awarded themselves nearly $18.4 billion in bonuses as the economy was deteriorating and the government was spending billions to bail out financial institutions, President Barack Obama called their actions "shameful."
Yet the outrage has been ignited primarily by excesses on Wall Street. In 2007, for instance, Goldman Sachs Chief Executive Officer Lloyd Blanfein took home nearly $54 million in salary, perks, bonuses and other stock awards. J.P. Morgan Chase CEO James Dimon collected $30 million in cash, stock and options. When former CEO John Thain joined Merrill Lynch in late 2007, he received a $15 million signing bonus and a multiyear pay package valued from about $50 million to $120 million.
Beyond the financial industry, executive compensation consultant Bob Cartwright, SPHR, president of Intelligent Compensation LLC in Pflugerville, Texas, sees sound compensation planning by many responsible boards.
Professor of Human Relations Jay Lorsch, chairman of the Harvard Business School Global Corporate Governance Initiative in Cambridge, Mass., notes, "If a company is doing well, the amount the CEO and other executives earn is relatively small, probably 1 or 2 percent" of the annual returns to shareholders.
High-profile scandals are not representative, echoes pay consultant Gerry Miller, managing partner of DolmatConnell & Partners in Waltham, Mass. Thousands of U.S. boards and CEOs "try to do the right thing. You don’t hear about them; instead you hear about ridiculous abuses of shareholder trust."
Indeed, HR professionals across the country report that their executive comp policies encourage leaders to deliver their intended performance outcomes. In a January survey of 237 randomly selected Society for Human Resource Management (SHRM) members, 72 percent agreed or strongly agreed that their comp packages are motivating executives to excel.

PR Nightmare

Policies on pay packages are set by committees of corporate boards and then approved by the boards acting independent of company officers. That’s why boards hire consultants to advise them. Generally, the top HR person serves as a contact and resource for these committees.
Breaking Out Executive Pay
To understand the basics of executive comp, picture five buckets:
1.Salaries. Annual, fixed compensation without strings. Under IRS Reg. 162(m), payments to an executive that are not performance-based are tax deductible as a business expense up to $1 million. More can still be deducted if the company can demonstrate that the compensation—cash or equity—is geared to performance.

2.Bonuses. Variable pay based on annual performance. Usually in cash, bonuses can also be stock options or shares. Discretionary bonuses, such as money awarded to prevent an executive from jumping to a competitor, would not qualify as tax deductible.

3.LTI. Long-term incentives cannot be cashed in for a stipulated period. They aim to ensure that the executive will remain with the company and continue to focus on long-term sustainability. They include stock options, which are valuable only if the stock goes up over time; restricted shares, which must be held for three years or more; and restricted performance units.

4.Perks. Fringes may include insurance policies, financial planning and legal services, memberships, and travel allowances. They generally account for 2 percent to 3 percent of the typical pay package.

5.Severance. Golden parachutes open when executives exit involuntarily for reasons other than cause, usually following change in control through merger or acquisition. The provisions, negotiated in contracts or expressed as policy, apply to executives serving "at will." Typically, a CEO’s parachute might be three times annual salary and bonus; a departing vice president of human resources might get two times that, says Jim Heim, managing partner at Pearl Meyer & Partners in Southborough, Mass.

Committee members are striving to ride out the media fire-storms as CEO indiscretions generate headlines. They’re addressing perquisites that seem to have no direct business purpose and golden parachutes that greatly enrich departing leaders.
Comp committees are "protecting the core incentives: salaries, bonuses and long-term incentives [LTI], and cutting perks and severance," says Andrew Goldstein, North American co-leader of Executive Compensation Consulting at Watson Wyatt in Chicago. "The core categories are what really drive performance. For a CEO package that could go up to millions, [the public and legislators] focus on emotional things. It’s the club membership or the car that upsets them."

Who’s at the Top? Size Matters

Executive compensation policies may apply only to the CEO and all direct reports in the C-suite, or they may encompass as many as 80 executives. Actual salaries are difficult to determine because U.S. Securities and Exchange Commission (SEC) regulations only require publicly traded companies to report data on the CEO, chief financial officer and the three other highest earners. Typically, the CFO or senior vice president of human resources earns half or a third of the CEO’s rewards. For example, in 2007, large publicly traded companies such as Abbott Laboratories, Cigna, Delta Airlines Inc. and McGraw-Hill Cos. listed HR executives among their top five earners. Median annual total compensation for the top 50 highest-paid human resources managers was greater than $2 million.
Aside from Wall Street companies, where mega bonuses reach deep into organizations, most instances of excesses occur among CEOs, Goldstein says. "Have you heard anyone complain about the compensation package for the CFO or VP of HR?"

When the Numbers Are In …

Outside of finance, the highest-paid executives tend to head companies generating billions in revenue. In 2007, the 30 highest-paid CEOs received total annual compensation packages of
$40 million to $322 million.
Yet when researchers with Corporate Library, an independent corporate governance group, looked at CEO pay for 2,701 U.S. companies in 2007, adding smaller companies to the mix, the median salary was $590,000 and total compensation was
$2.5 million—certainly not chump change, but arguably more in line with the responsibilities corporate leaders assume.
As data filters into the SEC this spring, it should become clear that most CEOs have been scathed by the recession, too. "Executives in 2008 and 2009 will have lost tons of accumulated wealth," Goldstein predicts. "The largest part of most executive pay packages gets linked to performance via financial metrics such as increasing the company’s stock price. But last year, S&P 500 stocks averaged a 40 percent decline. Many were off by 50 percent to 75 percent, says Russell Miller, managing director of the Executive Compensation Advisors Team at Korn/Ferry International in New York. As a result, executives are likely to qualify for fewer stock options and other forms of equity. If they did receive options, they’re probably "underwater"—the share price is less than the price at which the option can be exercised.
Critics point to annual or quarterly "short-term" incentives as contributing to the reckless behavior that led to the collapse in banking and real estate. Yet most executives have the bulk of their compensation linked to performance criteria and awarded as LTI, usually across three years. In addition, many companies already require CEOs and other top executives to own and retain shares of company stock to ensure they will always have "skin in the game." Even at investment banks where employees earn huge annual bonuses, comp committees prorate payments across three years to retain talent.
A 2008 study of 417 companies with annual revenue of at least $5 billion conducted by the Hay Group with The Wall Street Journal reveals that compensation committees have been favoring LTI above all other categories of ongoing compensation. The typical allocation is salary, 18 percent; bonus, 24 percent; and LTI, 58 percent.

Sweetheart Deals

Most arrangements for bonuses and LTI include a threshold executives must reach to earn performance-based compensation. Meeting a target usually entitles executives to 100 percent of the bonus or LTI. Finally, there’s a maximum earned by exceeding the target.
When stock prices or company earnings are taken into account, formulas that allow executives to qualify for bonuses sometimes look like sweetheart deals. They satisfy the Internal Revenue Service’s (IRS) performance-based test, but the accomplishments to pass the threshold might not be challenging. This explains why executives can be eligible for bonuses when companies have not been successful.
Such incentive pay remains problematic for Wall Street companies benefiting from the federal Troubled Asset Relief Program (TARP). Critics argue that tax money should not be used, and they express disbelief at the almost $20 billion disbursed to executives while the institutions they head are teetering. Hence, the American Recovery and Reinvestment Act of 2009 (ARRA) applies retroactively to executives in companies that accept bailouts. It directs U.S. Treasury officials to review compensation paid to the top five senior executive officers and the next 20 most highly compensated executives to determine whether prior payments were inconsistent with the ARRA or public interest. If so, the secretary is directed to seek reimbursement.

What Happens Now?

Facing deteriorating economic conditions, 15 percent of respondents in SHRM’s January survey said their companies were planning to revise executive pay in the next 12 months. Twenty-nine percent had already done so in the past 12 months. Other studies show similar measures. Here are some changes that experts anticipate:

Salaries flat—or worse. Russell Miller says, "This year, you’ll see a 2.5 percent to 3 percent [increase], with scattered zero increases." In Pearl Meyer & Partners’ 2008 survey, respondents were more pessimistic. Thirty-six percent of companies were considering salary freezes.

Smaller LTI and bonuses. The bulk of 2009 cuts will be in LTI—ranging from 10 percent to 30 percent, Goldstein says. How come? In the past, a CEO could have received $2 million in LTI grants—through stock options, performance shares and restricted stock. Now, board members have seen stock prices halved, so the same award requires twice as much stock. That dilutes the number of company shares. As a result, comp committees will limit the number of shares they pay out. Of course, they could pay LTI in cash, but they’re not sufficiently cash rich, he says.
Half the companies responding to a December 2008 Watson Wyatt survey said they would cut bonus pools 20 percent to more than 50 percent this year; 11 percent do not plan to pay bonuses.
Overall, executives will still have performance incentives, but the thresholds will be lower to make it easier to qualify. Targets and maximums are expected to remain as before. "The threshold in the past would be 85 percent to 90 percent of the goal," says Irv Becker, national practice leader for Executive Compensation at the Hay Group in Philadelphia. "This year, companies are considering lowering the thresholds by 10 percent or 20 percent."
Plans that withhold LTI for four to five years are gaining support, says Bruce Ellig, SPHR, author of The Complete Guide to Executive Compensation (McGraw-Hill, 2007).

Evolving performance criteria. Because of economic instability, comp committees wait as long as they can before setting goals for bonuses and LTI. They’re broadening financial metrics—moving beyond increases of share values, looking to earnings, cash flow or receivables control. They’re looking inward, setting performance and pay targets based on company rather than market-driven criteria. They’re comparing their performance against peer companies that reflect their industry’s conditions, according to survey data from DolmatConnell, Hay, Mercer and Watson Wyatt. Some observers remain suspicious of such comparisons. "Make independent decisions for your company based on what is right for your company in its particular situation rather than following peer-group norms," advises Gerry Miller.

Sustainability measures. Many organizations are adding measures of long-term sustainability to performance criteria. These may be listed as "personal goals" in the proxy statement. They cover aspects of performance important for a company to maintain over time—customer satisfaction, the ability to build infrastructure, retention, development of talent and succession planning, says Vicki Elliott, worldwide partner and leader of Mercer’s global financial services industry network in New York.
"The CEO can get the financial numbers by stripping out the R&D or outsourcing stuff to make return on capital numbers look better," warns Doug Carlberg, president and CEO of M2Global Technology Ltd., a worldwide supplier of microwave components in San Antonio, Texas. Carlberg and his executive team are paid in accordance with a weighted dashboard that combines financial results with incentives for gaining market share, reducing costs per product, cutting cycle times and improving customer satisfaction.

LTI portfolio adjustments. Some companies will continue to break LTI into portfolios of stock options; time-based restricted stock that can’t be cashed out for a number of years or until retirement; or stock "performance units," a form of equity granted for achieving agreed-upon goals that must withstand the test of time to receive the award. The mix a committee chooses depends on its priorities. For retention, look to time-based restricted stock; for performance, look to options, says Jim Heim, managing partner at Pearl Meyer & Partners in Southborough, Mass.
The most common portfolio contains 50 percent options and
50 percent performance-based stock coupled to pay-out dates across three years. "If the stock price doesn’t increase, the options are worthless," Becker says. "If you don’t meet your goals, you get zero."

Perks toned down—and cut. Many executives will say goodbye to health clubs, golf and jets. In its December 2008 survey, Watson Wyatt found that 21 percent of the 264 companies polled have reduced or eliminated perks or expect to. Another 10 percent were considering doing so. Under ARRA, TARP recipients’ boards must have in place a policy regarding excessive expenditures including entertainment, facility renovations, transportation, or retreats and meetings for staff training or rewards.

Regulators Explore Conflicts of Interest

Critics suggest that conflicts of interest may contribute to skyrocketing pay for chief executive officers. For example, in December 2007, the U.S. House of Representatives Committee on Oversight and Government Reform issued a report concluding that there may be conflicts of interest pushing CEO salaries higher when consulting firms provide executive compensation advice and other services to the same company.
According to the report, in 2006, at least 113 of the Fortune 250 companies received executive pay advice from consultants providing other services to the company. On average, companies paid these consultants $2.3 million for other services and less than $220,000 for executive compensation advice. The median CEO salary of the Fortune 250 companies that hired compensation consultants was 67 percent higher than the median CEO salary of companies that did not use conflicted consultants.
Representatives of large consulting firms with portfolios beyond executive compensation such as Hewitt, Mercer, Towers Perrin, Watson Wyatt and others dispute the conclusion. They insist that they have sufficient safeguards. Andrew Goldstein of Watson Wyatt in Chicago says academic studies prove executive pay is not higher when consulting firms provide executive comp consulting and other HR services.
Others voice doubt. "There are studies that find there’s no conflict, but intuitively it doesn’t make sense," says Professor Steve Balsam of Temple University, author of Executive Compensation: An Introduction to Practice and Theory (WorldatWork, 2007). "If the CEO hires you to provide recommendations, you’ll want to make that CEO happy."
"Everyone knows what’s going on," says Gerry Miller at DolmatConnell & Partners, an executive compensation consultant. "There’s no way you can be totally objective when your executive comp business is generating $150,000 and your company is getting a million from the same client for your benefits practice."

Clawbacks gain popularity. So far, almost 65 percent of publicly traded companies have voluntarily adopted clawbacks that allow them to recover money previously paid to executives under certain circumstances. Ethical or financial misconduct trigger them, but some companies, such as UBS, go further, recouping payments when deals go sour down the road. So far, few companies actually exercise clawbacks.
Clawbacks have achieved notoriety through the Sarbanes-Oxley Act (SOX) of 1992. SOX applies only to CEOs and CFOs and is limited to fraud and inaccurate financial reporting on official company documents. Under the ARRA, top executives in companies receiving government support are subject to clawbacks. Companies can clawback bonuses, retention awards or incentives paid to five senior executive officers or the next 20 most highly compensated employees based on statements of earnings, revenues, gains or other criteria later found to be materially inaccurate.

Sensible severance reforms. According to a 2007 study by Alvarez & Marsal Taxand LLC, 82 percent of the CEOs from the 200 top publicly traded U.S. companies were entitled to cash severance upon termination. The average value of the benefits a CEO received if there was a "change in control" was $38.4 million. The average for lower ranking C-suite officers was $13.2 million.
"Severance packages are coming down," predicts Goldstein. "There will be self-imposed or legislative limits on pay for failure" to perform.
Congress is leading the way. The ARRA rules prohibit TARP recipients from offering golden parachutes. And, companies are reforming policies. In a 2008 survey by Pearl Meyer & Partners, 32 percent of board directors said they were considering changing severance agreements. Forty-one percent of the respondents to SHRM’s January survey whose companies made changes in executive comp policies said golden parachutes were eliminated.
Proponents say golden parachutes protect an executive from losing his or her job for no good reason. A newly named CEO, for example, takes a risk in the first few years. But as time goes by, the situation tends to stabilize. As a result, some boards are considering offering severance in tiers—protecting the executive for the first two or three years with a healthy payout, then reducing the entitlement.

Changing ownership requirements. The rule has been to require CEOs to own stock equal to three to five times base salary; for other C-suite executives, it’s one to two times. When stock prices declined, executives were obligated to buy shares to keep the ratio in balance. Instead, comp committees are looking for long-term ways to keep executives tied in that do not require them to buy and sell stock as the market fluctuates. "You’ll be seeing less focus on the value of the shares," Heim says.

Proxies brought into compliance. When the SEC required greater disclosure requirements for the compensation discussion and analysis (CD&A) sections that are included in proxy statements, it sought to require companies to justify payments in language that the average person could comprehend. So far, compliance has been uneven. In a 2008 study, Pearl Meyer & Partners found that CD&A sections were getting longer, but not clearer.
"The SEC is not happy," Ellig says. Most CD&A sections are too complicated. In addition, some companies have held back performance criteria and goals for fear of providing intelligence to competitors. Ellig says HR executives should draft them with the advice of an attorney.

Checking for moral hazards. A moral hazard arises when an executive team receives rewards for the positive outcomes of good investments, but remains insulated from the negative consequences of bad ones. Critics blame this approach in part for Wall Street’s financial crisis.
In the ARRA, Congress has taken the lead in seeking to mitigate moral hazards. It prohibits companies that take TARP funds from providing incentives that encourage senior executive officers to take unnecessary and excessive risks.
Compensation committees are required to review incentive arrangements with company risk officers prior to approval. It is likely that this mandate will be extended in future government programs and other companies may independently see advantages of internal risk analyses as a precondition for approval of incentive pay policies, Becker predicts.
This year, compensation committees will be mindful of the need to differentiate between prudent risk and "riverboat gambling." "They’re talking about attaching strings, deferring bonus payouts for three or more years, even until retirement," says Alexander Cwirko-Godycki, research manager for executive compensation at Equilar Inc. in Redwood Shores, Calif.

Retention and Recruitment Worries

As bonuses and equity values fell and stock options sank under water, retention handcuffs linked to compensation disappeared. Directors and CEOs worry about their top talent being picked off by competitors. So far, it’s not happening, and critics contend that illusory threats of executive mobility gin up pay. "Talk to senior HR people and ask them how much voluntary turnover they’ve experienced recently," Goldstein says. "The answer is: very little."
Some 1,484 CEOs left their jobs in 2008, the most CEO turnover recorded by outplacement firm Challenger, Gray & Christmas since it began surveying in 1999. Of those, only 127, less than
9 percent, moved on to positions at other companies.

Watch Congress Warily

Under the Obama administration, Congress quickly tightened retroactive regulations on executives whose companies participate in bailouts. The ARRA amends the Emergency Economic Stabilization Act, the source of TARP compensation standards.
It’s possible such standards might be extended to federal contractors—but not so far. The Office of Management and Budget set the maximum contractual cost reimbursement for executive compensation at $612,196 in March 2008. Congress, the SEC or IRS could weigh in with regulations aimed at everyone else. For now, it looks like clawbacks, severance restrictions and deductibility may be considered for U.S. companies not taking bailouts.
The ARRA requires TARP recipients to grant shareholders non-binding say on pay. President Obama and SEC head Mary Schapiro support requiring all public companies to offer shareholders an advisory vote. Proposed legislation modeled on the United Kingdom’s say on pay law would encourage transparency and dialogue between shareholders and directors. Apart from government involvement, according to The Wall Street Journal, 16 U.S. companies currently grant or plan to grant say on pay. Among them: Aflac, Ingersoll Rand, Intel and Motorola.
Just how far the feds will go has HR practitioners concerned: "Everyone shouldn’t be painted with the same brush," insists Ramona Frazier, chief human resources officer of Inomedic Inc., a health care services company in Hampton, Va. Those who "abused their positions should be penalized. But if a company doesn’t take money from the government, it should be able to pay executives whatever it decides."
As criteria for merit awards extend beyond financial measures, HR systems and processes that identify top performers will be crucial. "You can’t afford to pay large rewards across the board. You have to be more discerning; more attention to performance management and selectivity of high performers is required," advises Elliott.
Heim agrees. "There’s a lot of pressure on HR to spot the ‘A’ players."
For HR executives who want to gain the ear of the CEO, Ellig, a 1996 chair of SHRM, sees no area in the HR portfolio more important than executive compensation.


In the above readings, the author lists some of the most 'outrageous examples of severance pay' for CEO's, and the topic of CEO pay and severance packages has received a great deal of negative publicity in light of today's economic turbulence.
But ignoring the worst examples of CEO pay abuse, what recommendations would you make to bring executive compensation under control? What do you think about "pay-for-performance"? What would you include in your benefits package for senior leadership? How would you attract and retain strong leadership? Read the above article from SHRM on the perceptions and realities of executive pay before responding.

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