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Explain the Potential Adverse Impacts on Strategy Implementation When the Ceos of Companies Receive Extremely High Compensation

Essay by   •  August 5, 2013  •  Research Paper  •  1,021 Words (5 Pages)  •  1,189 Views

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In many businesses Chief Executive Office are highly compensated in the United States. The compensation ranges between 200 to 400 times of most workers in U. S. and this come from surveys which show CEOs as low paid. In comparison to other CEOs or portraying them as rare endowment that is scarce. People like Crystal who oppose with the way of thinking and others like Kay and Robinson who believe the money the CEO's make is reasonable by the performance. There are many recommendations put forward on the way CEOs pay levels are reviewed and controlled. Although some include stockholders and board of directors, and others take legislation form (Case 7). Therefore, this paper will analyze CEOs compensation by answering the questions below.

1. Explain the potential adverse impacts on strategy implementation when the CEOs of companies receive extremely high compensation.

Many CEOs pay come from stock options they also are able to purchase a significant amount of stock in a company which will shift the ownership stake within the corporation. This can lead to board manipulation and possible conflict of interest and can affect the strategy implementation in the corporation (Dow and Raposo, 2005; Whelton, 2006).

Another difficult impact of CEO high compensation is the importance that it puts on the short term proceeds and less effort on long term tactic to the companies performance. Often the CEO incentive packages reward short term performance and not focusing on the long term performance of the company. Which will impact the long term strategy implementation within the corporation (Whelton, 2006; Dow and Raposo, 2005)?

The CEO highly compensation reduces the amount of money that is available to a company to take on major projects which would improve the companies performance. Most of the CEOs pay is a large portion of the companies' profits in the US which has a huge impact on the amount of resource available to the company. The less money the company has the less independence they will have in implementing several of its strategies (Whelton, 2006).

2. Discuss the merits of the various recommendations for solutions to the problem of extremely high CEO compensation.

The solutions for the high paying CEOs in this article are either legislative or organizational. Legislative involves introducing new policies that will control CEOs compensation. This can be in relation to the workers within the company and require that a hourly employee representatives sit on the board of director. The recommendation will help put the CEOs pay at a level throughout cooperation's by implementing the recommended laws.

Company's recommendations should include a representative for hourly employees on developing internal pools of the potential CEOs. They also should link their compensation package to a long term performance. Therefore, it will help motivate the employees within the company and across the industry for there high performance. By developing an internal pool for future CEOs will decrease the demand for them because of the huge supply. Also the compensation rates will decline also to a reasonable level (Dow and Rapaso, 2005).

3. What non-regulatory pressures are most likely to bring

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