Recommendations for Executive Compensation

As the part of the management of the company, I will carry out following actions:

• The executives can collect short-term profits (such as a large bonus) and use stock options and then leave the company before any long-term financial problem is revealed. The legal department of the company needs to ensure that the Sarbanes-Oxley Act of 2002 is followed that prevents the executives to sell the company stocks after increasing stock prices by misleading the public.
• The company also ensures adhering to the Dodd-Frank Act that requires disclosing the ratio of CEO pay to median worker pay.
• HR directors are made part of the remuneration committee. However, there are questions about the abilities of HR personnel who must be aware of the areas of taxation and finance. The rewarding system in the organizations is heavily dependent on above-mentioned aspects. One needs to understand the working of finances so that the performance targets or long-term bonuses can be evaluated.
• Introduce and implement the job evaluation systems for jobs at the executive level to determine the pay scale. The executives have higher points because of many responsibilities they are fulfilling such as the financial and supervisory responsibility. Although the pay will be noticeable higher as compared to lower-level employees, the pay can be related to different factors based on justifications. Thus, any power relation between the members of the board can be avoided if the pay at different levels is justified.
• There are strong signs that the companies involve the HR and reward professionals willingly in the remuneration policies. There must be dedicated reward directors who have the experience of designing and implementing executive remuneration.

There is a moderating influence of HR on the decisions. Decisions about the executives’ pay are made by the remuneration committees that include all non-executive directors but these committees fail to understand the complex subject and use only the performance indicators from rivals. In contrast, HR professionals must be allowed to advise the packages in terms of compensation and calibration. The ways in which reward packages are put together and whether they pass ethically lead to tough questions about the management practices. HR can be deceived by the executives with the details of bonus schemes as delivering profits. But the issue of excess executives’ pay remains subject to no science to proportionality. There is the possibility of a flaw in compensation culture and design even in presence of tougher regulatory caps. In order to ensure the contribution of employees towards business success, there is need to encourage transparency and minimize any negative effects of excess executives’ pay on the moral and innovation.