Executive Compensation the Ethical and Impact Challenge

Executive Compensation: The Ethical and Impact Challenge Executive Compensation: The Ethical and Impact Challenge Executive compensation is defined as the reward given to corporate executive employees for their job performance. Corporate executive employees are the higher echelon company employees and may include the chief financial officers, chief executive officer, upper level managers and the company president. Executive compensation mostly consists of base salary, bonuses, long-term incentives benefits, and prerequisites whose main purpose is to motivate the executives to steer†¦show more content†¦The severance compensation is usually negotiated to allow for payment even when the executives clearly are unable to deliver on performance targets. Executive perquisites or ``perks`` are special benefits and services for top employees of companies and may include various special amenities such as club membership, special parking, car services among others. Most of these are aimed at either enhancing the executive’s performan ce or bringing about status. Pay equity It is with this background of wide discrepancies in compensations between executives and other employees and the fact that executive receive huge compensation packages despite their performance that critics have raised the issue of equity and ethical concerns. The free market system has a culture of rewarding employees based on their ability, merit and performance but executive compensation defies this culture (Mullins, 2007). The equity issues are compounded considering that in countries such as America many workers earn in a year what there bosses earn in an evening (Mullins, 2007). Even among stock investors and anti-globalization campaigners, the issue of pay package is a shared concern with claims that executives pay is extremely high. 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