Limits on the Amount of Corporate Compensation

Writing Assignment 2
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Writing Assignment 2
Corporate governance is an emerging area of concern for most business entities globally. Companies and organizations take up the mantle to enhance management and governance through the corporate governance framework. Accountability in management and financial reporting is one of the main agendas for implementing corporate governance structures and regulations in those organizations. The management structure significantly contributes to the maximization of shareholders' wealth. Companies with effective management structures tend to perform considerably better than those with ineffective corporate governance frameworks. Ragas and Culp in Business Essentials for Strategic Communicators book gives detailed information on corporate governance in chapter 7. A review of Facebook's planned IPO looks into the Company's management while reflecting on women's management positions. The chapter articulates various management structures and frameworks in place to enhance the effective operation of Companies. The paper examines chapter 7 in Ragas and Culp's book on Business Essentials for Strategic Communicators and addresses questions regarding corporate governance, corporate Compensation, and its benefits to employees and Company at large.
Limits on the amount of Corporate Compensation
Corporate governance (CG) entails the checks in accountability of corporate management and boards in enhancing stakeholders’ interests for wealth maximization. CG framework defines the accountability framework of directors and managers of the Company through the Company’s charter, formal policies, and bylaws (Ragas & Culp, 2017). Management and Accounting failures and scandals in the world's most known Companies created the urge to implement corporate governance to protect the interests of shareholders. The collapse of companies such as Enron, WorldCom, and Tyco is attributed to a failure in structuring effective governance structures to regulate management activities (Jensen & Murphy, 1990). These failures caused an alarm globally, pushing investors to take an active role in managing their investment portfolios. The actions and performance of managers will be well evaluated through effective governance mechanisms (Ragas & Culp, 2017). The financial crisis of 2008 led to more reforms in corporate governance structures, thus enhancing shareholder activism, which has become a vital investment strategy element.
Corporate compensations come from the CG structures for successful management practices. Executive compensation rises more concerns in the corporate sector. The main focus should not be on the amount of Compensation directed to executives, but rather on how the bonuses are made (Jensen & Murphy, 1990). Compensation should relate to the performance of the executive board. In most firms, Compensation has become independent of performance, an issue that raises more concerns on corporate governance structures.
There should be no limits on the amount of corporate Compensation for executives and employees (Business Law, 2020). Companies should formulate effective compensation plans that are in line with the Company's payment ability and performance of employees. Setting the amount limits will be viewed as an interference of the governments with the free market, as it is a private sector matter (Jensen & Murphy, 1990). Companies should structure effective compensation agreements with individual executives. Organizational skills should play a part in determining the compensation plan the Company is willing to offer the executives (Cowen, 2019). However, regulations on executive compensation are vital in reducing the actions of managers awarding themselves huge bonuses and wages at the expense of shareholders and employees. Through taxes, regulation can be implemented on certain income levels to prevent excessive Compensation. In cases where bailout receipts are offered, compensation limits on high-paid executives are necessary (Business Law, 2020). Limitations should not be implemented on compensation amounts.
The Detr...