Business Ethics case study

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Wages of Failure : The Ethics of Executive Compensation

Executive compensation in the United States is generally appropriate Note that the lucrative exit package for Bill Hogson is the prevailing market package for a prominent multinational and telecommunications company . High exit compensation packages have the virtue of allowing poor leaders to resign earlier than later to spare the company from further poor decision making . Hogson 's poor performance as company CEO attests to this fact

Performance-based pay is an attractive solution because it motivates

br managers to work harder . If a manager outperforms , then he /she can expect higher salary grade and other compensations . There is , however , a major drawback . Suppose that a manager underperforms for more than two successive fiscal years . The manager may as well stay on board without the benefit of a lucrative compensation . This will inflict further damage to the company . This will also shield the company from acquiring the best talents in the industry . An alternative solution is to set the compensation to its market price . The advantage of this alternative is quite obvious . While it motivates managers to work harder , it also pressures them to leave their positions if they underperform

The long-term effects of CEO performance are not always visible at the end of the fiscal year . For one , the long-term goals of the company are usually not viable within a fiscal year . To measure the performance of the CEO or manager , the criteria that should be utilized are the...