Reference no: EM133617590

Case: In 1965, CEOs' pay based on realized compensation grew to 20 times that of the average worker. Although the Sarbanes-Oxley-Act (SOX), through its provisions, has made it harder for CEOs to obtain loans from public corporations, and the Dodd-Frank Act of 2010 mandated the Securities and Exchange Commission (SEC) to create rules to deal with disclosure of compensation ratios between workers and executives; CEOs' compensation vis à vis workers is not decreasing.

In addition to monetary pay, corporations are now compensating their executives with millions of dollars worth of valuable stock options more than executives in countries like Norway receive, whose corporations have been making astronomical profits.

The Dodd-Frank Act provides for stockholders' votes on executive compensation; such advice from stockholders, however, does not bind the corporation directors and executives. Although in the United States, corporations have compensation committees and independent directors to protect the institution from agency influencers, executives and their agents have extracted from corporations' coffers huge compensation deals. For example, Jack Welch, former CEO of General Electric (GE), received from GE close to half a billion dollars in retirement benefits apart from receiving millions of dollars in salary.

Question 1: a proposal as the CEO of ABC Corporation, explaining why you believe your compensation should be significantly higher than that of the average worker. Also, discuss whether income inequality exists in the company and suggest strategies to address it. In your proposal, specify the exact amount, such as "200 times," by which you believe your compensation should exceed that of the average worker.

Question 2: What innovative approaches could policymakers consider to address the challenges that the Dodd-Frank Act was designed to tackle? Some countries have elected to have workers sit on corporate boards; do you think the time has come for an ordinary worker to sit on the board of directors of an American public corporation? In your opinion, would such a policy change bring advantages or disadvantages to the business, and if so, what are those advantages and disadvantages?

In what ways might alternative regulatory models, such as self-regulation in benign areas of corporate governance or regulatory sandboxes, be employed to achieve the goals of the Dodd-Frank Act without over-regulating corporations?