The paper "Corporate Governance: Executive Pay Must Be Tackled to Rebuild Trust in Business" is a good example of a macro & microeconomics case study. Tovey (2016) explores the current debate over what is perceived to be excessive executive pay in businesses. The article discusses why various groups there is distrust businesses due to the widening pay dispersion. Executive pay has come under scrutiny in recent years, and this calls for a need to restore public confidence in executive pay. An investor group has opened a challenge to organizations over excessive executive pay.
The investor group presented ways of rebuilding public trust over the executives' high levels of remuneration. They include choosing a remuneration that is appropriate for a company's strategy and business needs, the board should be appropriately engaged during the remuneration process, remuneration committee to exercise independent judgment among others. Furthermore, the Investment Association declared that it was necessary to simplify the pay structures of the company executives and try to align shareholders' interests with those of the business. Shareholders' engagement should emphasize the remuneration structure and be clear with the company on their views regarding the remunerations. This year has seen the rise of rebellion from the investors overpay as well as the association of the working group whose aim is to handle the shareholder's opposition over the unjustifiable boss remuneration.
There is a need to restore public confidence as many reports have indicated that shareholders, the board, and the executive noted that the current strategies were no longer working. The current plan aims to ensure the board clearly explains why there is a huge difference in the remuneration package between the chief executive and other employees, which is a multiple of some employees. This issue has also attracted the attention of the prime minister, who is against corporate bosses' excessive pay.
There is a need for clarity on how to pay goals are set and why discretion is used to award remuneration. The investor report has called for deserting the previously used three-year "long-term incentive plan" model because it does not reflect how businesses work.
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