Question

Question 1
Provide a thorough examination of arguments that government intervention is
necessary to fix perceived problems in executive compensation contracts.

Answer 1

Ans ) Executive compensation : Executive compensation, also known as executive pay, refers to remuneration packages specifically designed for business leaders, senior management and executive-level employees of a company. Executive compensation includes benefits such as salaries, perks, incentives, insurances etc.

main objectives of executive compensation policy:

1 ) The manager should be incentivized so that they adopt those strategies, investments, and actions that result in the increase in the shareholder value. Thus, an executive aligns his interest with the interest of the shareholder.

2 )The remuneration package should be designed such a way that it motivates the executives to work harder, take risks and take unpleasant decisions such as termination or retrenchment, aimed at increasing the shareholder’s wealth.

3 ) The executive compensation is often designed with the intent to retain the executives during the bad times caused due to the adverse market and industry factors.

Different Types of Compensation

There are different types of compensation. Schuler identified three major types of compensation, which are mentioned below;

1. Non-monetary Compensation.
2. Direct Compensation.
3. Indirect compensation .

Compensation plan decided by the :

Executive compensation or executive pay is composed of the financial compensation and other non-financial awards received by an executive from their firm for their service to the organization. Executive pay is an important part of corporate governance, and is often determined by a company's board of directors.

Hence there is no need of government interventions while deciding the executive compensation. If one do then government intervention is a big demotivation.

Hecce government intervention is not necessary