Ethical Choices in the Design and Administration of Executive Compensation Programs

Paper Type:  Case study
Pages:  5
Wordcount:  1155 Words
Date:  2022-05-17

The case study at hand is based on the way the executives in an organization have been facing criticisms and scrutiny based on the kind of compensation that they have been getting. The case study highlights the notion that most of the activities that have been revolving around the demand and provision of new reviews on the executive compensations. Some executives have been taking part in some misconducts in that they violate the laws that have been put in place when it comes to the kind of compensations that they seek even without fulfilling the missions that the organizations have set at large. In that case, there have been some ethical issues and choices when it comes to dealing with all the executives in an organization. The case study, therefore, highlights some of the ways ethical misconducts can be reduced to have a business area that with an ample flow of events.

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One of the most important facts that has been mentioned in the case is based on the executive compensation in the age of Enron. It states that many people have been taking part in irregular business actions and in that case, they have received allegations concerning unethical roles that are played by the corporate executives (Heisler, 2007). It also states that some corporates such as Enron, WorldCom, Adelphia Communications and Global Crossing communications have profiled some unethical events when it comes the kind of compensations that they offer to the executives. In that case, all these unethical motives are the ones that are of major concern in the article, and they are dealt with by putting in place policies that are related them.

The other critical issue that has been highlighted in the article is that the there are some components of executive companies that need to be put in place ethically. The matters are based on base salary and the bonuses. It states that only people who have proved to be worthy of getting the bonuses are the ones who should be awarded but the events taking place have been exhibiting a complete opposite of the same (Heisler, 2007). It also mentions another critical issue which is based on long-term incentives that have provided to people so that they can be able to get the motivation to achieve the goals that the organizations have set. These incentives have not been offered to people legally as those who have not made any effort in the organizations are the ones that get them.

In that case, there is some alternative course of actions that need to be implemented to make sure that executive compensation is carried out ethically. One of the courses of action, in this case, can be to come up with a compensation committee that will exercise due diligence when it comes to doing an investigation of the market data to price the job at hand. This can be done by making sure that the correct scope when it comes to the salary medians is obtained and submitted to the executives at large. This cause of action is effective as only the executives who have done well will be rewarded, and this will do according to the financial position of the organizations. Thus, this will be the best course of action because the compensation committee will control all the ethical initiatives.

Equity on Demand: The Netflix Approach to Compensation

In this case study, the primary focus is on Netflix which is a small group that is under the Silicon Valley companies when it comes to technologies that bubbled in the 1990s. It is among the companies that have had to battle issues of executive compensation, and the kind of measures that it has been putting in place has proved to be fruitful over the many years of existence. The business model that Netflix rolled out was not appropriate, and in that case, it had to make sure that all the strategies that it had were full of merits so that the investment community would stop being skeptical on what it was doing (Larcker, McCall & Tayan, 2010). For the company to be able to embrace the culture of legitimate compensation, it cultivated a culture of hard work, creativity, accountability, and initiative among all the employees that were at its disposal. This came after it had faced competition from other companies such as Wal-Mart, Blockbuster, and Amazon.

One of the key issues that are imminent from the case study is that the Netflix was not able to retain a number of its employees due to the kind of compensation policies that it had put in place. The officials were not able to embrace the art of attraction, motivation, and retention as these are the factors that guide the aspect of compensation. This means all employees who were working hard did not get any form of compensation. The other thing is that the company was still exercising the aspect of employment termination after a given period and that means the productivity of the employees went down having in mind that they did not get a better form of compensation.

In that case, there is some alternative course of action that needs to be put in places so that Netflix can be able to get back to its feet and properly handle the employees. For instance, it can bring in the idea of cash bonuses for those who have shown resilience and hard work. This is a form of compensation that can be done by making sure that everything is computed to avoid any unethical events from taking place. The aspect of employment termination should also be eliminated and only imposed on those who have shown cases of misconduct to be able to retain those who have shown loyalty and desire to fulfill the organizations' objectives.

Conclusion

These course of actions can be evaluated after a given period of implantation to check the kind of satisfaction that is exhibited by the employees. The productivity of the employees is supposed to improve if they realize that they are being compensated based on the roles that they perform and also the missions that they have been able to accomplish. This course of action will be reliable if the employees exhibit aspects of being in line with the provision of the organization's objectives. The best course of actions to recommend in this case will be making sure that the process of compensations is done transparently and only those who have the right qualities are supposed to get them. This means that the management will have to play a significant role in making sure that they invest in supervisions and monitoring the way all production process is being conducted alongside ethical considerations.

References

Heisler, J. W. (2007). "Ethical choices in the design and administration of executive compensation programs." Kelley School of Business.

Larcker, D. F., McCall, A., & Tayan, B. (2010). "Equity on Demand: The Netflix approach to compensation." Stanford Graduate School of Business

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Ethical Choices in the Design and Administration of Executive Compensation Programs. (2022, May 17). Retrieved from https://proessays.net/essays/ethical-choices-in-the-design-and-administration-of-executive-compensation-programs

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