1.Executive pay decision guidelines that consider shareholders’ interests
The structure and effective governance strategies are required during executive pay decisions; such decisions should put the shareholder’s interest at hand. The board of governor’s financial decisions should use strategies that are aimed at offering effective solutions to the present dismal equity markets without affecting the share holders’ interests.
The shareholders interest is a priority when undertaking executive pay decisions and the board of directors have an obligation to ensure that they do not impair those interests. One strategy which the board of governors and directors should employ when making executive pay decisions is through pay reductions of the executives, the current dismal performance in the market can not support high executive pay in order to increase profitability. Reduction in executive base salaries is an effective way of cutting labor costs; putting in mind shareholders interests. Another strategy that the board of governors can use during executive pay decisions is the use of executive compensation governance (David 15). The compensation governance objective has the obligation of fostering succession plans and developing new leadership skill aimed at improving the market’s profitability; this can be achieved through initiation of development programs and identification of potential leaders with a close consideration of the shareholders interests.
Another way of ensuring that shareholders interests are not impaired during executive pay decisions is through the involvement of the institutional shareholders in the executive pay decision making processes. Legislative initiatives towards the executive pay issues provide them with the right tools to help put the board of directors on check concerning their decisions (David 18).
The board of governors and directors can use the shareholder advisory groups when making executive pay decisions. The shareholders advisory groups task is to formulate strategies that are essential on defining the shareholders interests in the decision making processes concerning the executive pay. It is a prerequisite for a board of governors and the compensation committees to have the advisory group’s views before making any executive pay decision.
2. Motivations by companies to avoid downsizing
Labor costs form an essential factor in determining a company’s profitability. In order to sustain company operations during these recession period, companies must establish strategic ways of cutting labor costs. Cutting costs does not necessarily require downsizing, a situation whereby the employee productivity is optimum can not be compromised for the sake of current losses but should be preserved for the sake of future productivity. Downsizing can also be avoided through a thorough analysis of the other overhead expenses, and if they can be reduced, a company can opt to retain its employees and instead cut on the overhead expanses.
- Reducing labor costs without down-sizing
There are various strategies that a company may deploy to reduce operational costs without actually laying off the staff. One approach to this strategy is the work-sharing scheme with considerations to attendance patterns of the employees and reducing the working hours of the staff members. Other ways of reducing operational costs without downsizing is through elimination or reduction of employee bonuses, delaying salary/wage raises and cutting down salaries, elimination of temporary staff through reallocation of tasks to the permanent employees.
4. Social Security Act of 1935
Social security refers to social insurance covers and policies that are funded through the use of Pay Roll taxes .The social security act was an act aimed at providing the general welfare of individuals, through the establishment of old age benefits and facilitating the states make the required provisions concerning aged people, blind individuals, children who are dependent and crippled, maternal welfare and to spare funds that are required for general public health. It was primarily enacted to maintain the financial well being of eligible individuals. Prior to its enactment, the United States lacked social security. The Social Security act offered a platform for unemployment compensation and old age retirement benefits. It also dispatched monetary assistance that would facilitate the development of programs such as rehabilitation centers, public health institutions, child welfare and offering assistance to the aged and people with disabilities (Achenbaum 25). The act constituted a compulsory insurance cover for old age, issuing benefits to the individuals who are aged above sixty five and the establishment of a reserve fund that is financed through the imposition of pay roll taxes on employers and their employees. The Act was only applicable to employees who were working under the industrial and commercial sectors, although subsequent amendments have resulted to incorporation of other sectors. The Social Security Act was primarily enacted in an attempt to reduce what were being viewed as dangers in the present American state; they included poverty, old age, increasing cases of unemployment and the burdens that are associated with widows and orphans (Achenbaum 25).
The enactment of the Social Security Act during 1935 presented a platform for the current state of social security issues in the United States. Various amendments have been incorporated into the Social Security act for it to match the present state in terms of social needs of the United States population.
Works cited
Achenbaum, Andrew. Social Security Visions and Revisions. New York: Cambridge University Press, 1986.
David, Wise. “10 Executive Comp Issues for Aligning Pay Strategy.” Helping organizations work. July 30, 2010. Pp 12-25.
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