Executive Compensation. To Legislate or Not To Legislate

The House of Representatives has recently been tasked with the responsibility of deciding on a particularly controversial bill: whether executives of publicly traded companies should receive a fixed pay and compensation package irrespective of their performance. This bill is likely to pass through the House of Representatives without any glitches though it is difficult to predict the same for the Senate. However, the question that begs to be answered is whether such a bill is the right step to take for a contemporary nation such as America. Also, is our country ready for the economic implications of such a plan?

 

A heated argument is presently ongoing, with the White House formally opposing the bill and arguing that compensation packages for executives in publicly held companies should be based on their performance and not on the figures they wish to receive. Another school of thought disagrees with this notion, saying that the nature of the work of such executives is unsuited to performance based pay.

 

For obvious reasons however, the stockholders would like to have such a bill passed especially because of the power such a bill would place in their hands. Lately, stockholders have frowned at the way several companies are being run with declining profits and horrible business practices. The senior leaders of these companies continue to receive large compensation, stock options and other benefits, even when the company is obviously performing badly. 

 

Many believe that executive officers will cut down on unnecessary spending if their compensation were tied to their performance rather than their wishes. Many investors have started grumbling loudly especially as companies fall short of profits and large payouts continue to go out to the officers. 

 

Former President, George Bush once urged the officers of these companies to step up and take more responsibility. However, he also stated that the government may not readily want to involve itself in such matters. Many people also feel uncomfortable with the government making decisions about their pay checks and compensation. Many Americans believe that the government should not concern itself too much with private sector policies.

 

Even though Americans feel this way about the government's involvement they would still like measures put in place to hold executives accountable especially those who lead multinational companies who employ hundreds of thousands of employees.

 

Some argue that this idea is nothing new or strange as countries such as Spain, Australia and even Britain, already have such policies in place. This therefore makes people feel that this bill has a chance of being passed in the House of Representatives and the Senate.

 

 

The expectation is that this bill will pass through the House of Representatives once voting commences. However what happens when the bill reaches the Senate is still largely unpredictable and unclear although there has been a lot of support from quite a number of people especially those who work for companies involved in this issues. Also, the prospect of the voting process being heavily influenced by political figures will certainly make for a very interesting outcome. 

 

However, if this bill does indeed pass both houses of congress, you can be certain that there will be a flurry of legal challenges, going all the way to the Supreme Court which will be brought about by all manner of stakeholders affected by the bill challenging the legality of such a bill.

 

 

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