Contemporary Business 14th Edition by Louis Boone, David Kurtz

تمرين 17

The Good, Bad, and Ugly of Executive Pay Executives at large institutions-particularly those on Wall Street-are accustomed to receiving huge compensation packages and multimillion-dollar bonuses each year. That may be fine when their firms are raking in profits. The problem is that they have continued to receive large paychecks despite steep financial losses. Making matters worse is the fact that some of the financial institutions for which they work accepted government assistance from the economic stimulus package.Congress reacted to taxpayer outrage by enacting new rules, in which top executives at the firms receiving assistance must accept lim-its on their cash bonuses. Lavish severance packages are now banned, and shareholders must approve executive pay. Despite these new regulations, some firms continue to run amok when it comes to executive compensation. One such CEO took home a pay increase despite the fact that the company did so poorly it had to lay off employees. But others have voluntarily risen to the occasion. Aflac CEO Daniel Amos declined his bonus of nearly $3 million, and top executives at Ford Motor Company cut their own pay by 30 percent.At the federal level, Kenneth Feinberg-a.k.a. the pay czar-has proposed new ground rules for executive compensation for companies everywhere. According to Feinberg, executives should be limited to $500,000 annually in cash compensation-anything additional should come in the form of stock or other benefits. Executives should pay for their own entertainment perks-like golf club memberships.Overall, it appears that some true reforms may be on the horizon. Some executives might not like the new practices, but engaging in them voluntarily might be preferable. Companies and their boards will have to "adopt a set of core principles like accountability, alignment, fairness, and transparency," predicts compensation expert Donald Delves.
-Some critics of the proposed changes in executive com-pensation argue that reducing performance rewards will encourage talented managers to go elsewhere. Do you think this is a valid objection to pay limits? Why or why not?