Say on Pay: Does the Buck Stop Here Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

By 2007, executive compensation at U.S. companies have become very controversial issue. Reports in the press multimillion pay package in the form of stock options exercises, severance and pension payments, led to protests among many investors that the levels of compensation received from the hands. Negative sentiment was highest against the leaders who received large severance payments, despite the fact that the price of the stock has reduced significantly during their stay. Corporate governance observers called such situations "pay for failure". Critics of executive compensation levels serves a number of measures to rein in wages. These included increased disclosure of previously ambiguous provisions of the contract for the weekend and retirement packages, urging shareholders to vote to keep the directors who approved excessive amounts of pay, and a requirement that executive compensation packages put to shareholders every year for an advisory vote. This last sentence, commonly referred to as "say on pay" would give shareholders a direct voice (using proxy voting procedures) for the first time on compensation CEO. Proponents say on pay, believe that practice will put pressure on the directors to justify the proposed amount of compensation, and not stamped pay packages offered advice and consultancy. They also believed that the improvement of dialogue between shareholders and directors. Critics have argued that say-on-pay movement was politically motivated activist investors and public pension funds, which have tried to influence the issues that must be addressed members of the Board of Directors. Average shareholders remains to consider what impact, if any, say, to pay a compensation to the trends and whether it offered an innovative corporate management or unnecessary distraction for managers and board members. "Hide
by David F. Larcker, Brian Tayan Source: Stanford Graduate School of Business 21 pages. Publication Date: January 18, 2008. Prod. #: CG12-PDF-ENG