Secret Service Agents and Prostitutes, Student Loans, Corporate Taxes on Jets, Oil Subsidies (2012)

thefilmarchive.org April 26, 2012 Executive pay (also executive compensation) refers to financial compensation received by upper-level management (“executives”) of a firm. At least in the United States, it differs from other employee compensation in the forms it takes, laws and regulation it is subject to, its dramatic rise over the past three decades, and wide-ranging criticism leveled against it. While an executive may be any corporate “officer” — including presidents, vice presidents, and other upper-level managers — in any company, the source of most comment and controversy is the pay of chief executive officers (CEOs) of large publicly-held firms. In most publicly traded firms in the US, there are no controlling shareholders, and management and ownership are separate, creating what economists call a “principal–agent problem,” where upper-management (the “agent”) has different interests, and considerably more information, than shareholders (the “principals”).[1] Ideally, an executive’s pay is the product of “arm’s length” negotiation between the executive attempting to get the best possible deal for him/her self, and the board of directors seeking a deal that best serves the shareholders[2], rewarding executive performance without costing too much, and taking into account government regulations and tax law[3]. The compensation is typically a mixture of salary, bonuses, equity compensation (stock options, etc.), benefits, and perquisites. It often has surprising …