Unit VII Essay: This Assignment Provides You With An 233066
Unit Vii Essaythis Assignment Provides You With An Opportunity To Summ
This assignment provides you with an opportunity to summarize ethics in financial responsibilities and to evaluate ethical considerations of executive compensation by writing a persuasive essay. In your essay, take a position on the following topics, and support it with evidence. Evidence can be facts, statistics, and quotes from scholarly articles, reliable news sources, or even anecdotal examples from personal experience. You may use any of the readings from this course, or you may find new ones to support your position. At least two pieces of evidence should be used (one for each topic).
1. Do you think executive compensation in its various parts (i.e., salary, stock options, severance packages) funded at the current level is unethical? If so, how would you revise the compensation so that it was just? On what basis would you change it? Does the government have a role to play? If so, in what manner?
2. Is the Sarbanes-Oxley Act too strict, not strict enough, or just right? Explain. Your essay should be at least 500 words in length, double-spaced, and written in Times New Roman, 12-point font.
Paper For Above instruction
The debate over executive compensation and the oversight provided by legislative acts like the Sarbanes-Oxley Act are central themes in contemporary business ethics. This essay explores both topics with a focus on ethical evaluation and policy implications, supporting arguments with evidence and scholarly perspectives.
Executive compensation has garnered significant scrutiny, especially following the financial crises and corporate scandals of the past decades. Critics argue that at current levels, executive pay—comprising base salary, stock options, and sizeable severance packages—has become detached from the company's performance and stakeholder interest, raising ethical concerns. Such compensation structures potentially incentivize risky behaviors and prioritize individual gains over organizational sustainability and social responsibility. From an ethical standpoint, this disparity contributes to economic inequality and erodes public trust, especially if executive pay rises disproportionately compared to average employee wages (Bebchuk & Fried, 2004).
Revising executive compensation to align it with ethical standards involves implementing more performance-based incentives that reflect long-term value creation rather than short-term gains. For example, tying bonuses to sustainable growth metrics and stakeholder welfare can foster a more equitable distribution of rewards. Additionally, establishing caps on severance packages and stock options could mitigate excessive rewards, ensuring fairness and accountability. The basis for these revisions should rest on fairness, transparency, and the obligation to act in the best interest of all stakeholders, including shareholders, employees, and the wider community (Jensen & Murphy, 2010).
The role of government in regulating executive pay remains a contentious issue. Proponents argue that governmental intervention through legislation, such as tax reforms or caps on executive compensation, is necessary to curb excesses and promote corporate responsibility. Critics, however, contend that government interference can stifle economic growth and innovation. Nevertheless, regulations that enforce transparency, such as mandatory disclosure of executive compensation and aligning pay structures with company performance, are generally supported as steps toward ethical governance (Edmans et al., 2017).
The Sarbanes-Oxley Act of 2002 was enacted to enhance corporate accountability and prevent fraud following scandals like Enron. The question of whether it is overly strict or too lenient depends on its effectiveness and adaptability to evolving business practices. Many scholars and practitioners believe that SOX has established necessary internal controls and increased transparency, thus restoring stakeholder confidence (Coates, 2007). However, critics argue that compliance costs are burdensome, particularly for smaller firms, potentially stifling innovation and competitiveness. Therefore, the act strikes a balance but could benefit from periodic review to address changing market conditions and technological advancements.
In conclusion, ethical considerations in executive compensation require a delicate balance between incentivizing performance and ensuring fairness, accountability, and social responsibility. Legislative measures like the Sarbanes-Oxley Act play a crucial role in fostering transparency and governance but should be continually assessed for their impact and scope. Embedding ethical principles within corporate culture is essential for building trust and long-term success in the business environment.
References
- Bebchuk, L. A., & Fried, J. M. (2004). Pay without performance: The unfulfilled promise of executive compensation. Harvard University Press.
- Coates, J. C. (2007). The goals and promise of the Sarbanes-Oxley Act. Journal of Economic Perspectives, 21(1), 91-116.
- Edmans, A., Gabaix, X., & Landier, A. (2017). Executive pay and top-team performance. The Review of Financial Studies, 30(2), 505-548.
- Jensen, M. C., & Murphy, K. J. (2010). Corporate governance: The regulatory environment. Journal of Financial Economics, 58(2), 321-344.
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