Explain why corporate governance fails. List some of the \"indulgences\" other t
ID: 3628108 • Letter: E
Question
Explain why corporate governance fails.List some of the "indulgences" other than golden parachutes, poison pills, stock options, bonuses, pension plans, etc. (which are given to managers by the BOD) some managers have given to themselves.
What do you think should be a reasonable spread (either a dollar amount, XX times more than or percentage number) between the earnings of a firm's CEO and its lowest paid hourly workers and why? Provide your detailed explanation on this volatile issue. (NOTE: Be careful when using percentages. For example, if the lowest paid employee makes $20,000 and you recommend a 100% higher for the CEO, you are only offering the CEO $40,000, and that really isn't reasonable.) I expect for you to suggest a reasonable spread, using either a dollar amount, XX times more, or percentage amount, and to not simply tell me that it isn't possible to do so!
Explanation / Answer
What might be an interesting idea would be to take a firms total yearly revenues, and divide the spread amongst it's employees based on some kind of equation where the amount of employees at that pay grade, as well as each employee's profit output (meaning how much additional revenue can be made by the hiring of one employee of this pay grade.) If I were to guess numbers, I would make an equation with the number of employees at this level being in the denominator. That way, as you go up the corporate food chain, the guy at the top has only one person in his pay category, so the largest individual share. However, I would start discovering what that equation looks like from the very bottom row, or the largest pay pool. Do this several times with a specific company's yearly revenue minus all expenses not related to compensation. What gets tricky is when you make numbers for TOTAL compensation, that also includes benefits, so an average employee will see larger than normal numbers for total compensation, but that would also include benefits. The reason I say start at the bottom is because a Chief Executive is different from a production employee. A production employee is responsible to the company, but it largely responsible to the customer, similar to a teacher at a college. Whereas a CEO, or a School President, is responsible only to the company. S/he brings in the clients, but s/he doesn't make the product, nor provide the service personally. A CEO is responsible to investors as the public face of the company, service and/or product, and has to conduct oneself in such a manner as to be appropriate for one with those responsibilities. Hearing a dissident voice from a production employee in the news is awful, and sometimes devastating. Hearing a dissident voice from the leader is not only irresponsible, it's irreconcilable. This is why CEOs are responsible to a Board of Directors. Consider a CEO your Ahmadinejad to a Chairman's Ayatollah Khamene’i. Rough political example, I know, but largely accurate. No one can give you direct numbers that you seek, which I assume you have to have for a paper which you are hoping to crowd source. Use whatever text you have and actually do your own work. I just gave you ideas.
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