Looking At Executive Compensation In Bahrain Finance Essay

During the last two old ages planetary economic recovery has dominated the headlines of assorted intelligence bureaus. The stableness of U.S authorities still remains unsure. On July 21 2010 president

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Obama signed the Dodd Frank Act of 2010 which is intended to modulate executive

compensation. The act does non curtail the executive compensation degrees where as it clearly

restricts the mode by which executive compensations are designed.

The schemes adopted by corporate giants in counterbalancing and at that place by pulling executive

staff has ever been an country of sensitiveness in the field of human resource direction. Critics

have ever been claiming that sum allocated for counterbalancing top direction was manner

excessively high where as corporations keep on pressing that they need to counterbalance will in order to

retain and attract quality top executives. For the past few old ages executive wage has risen far excessively

high in comparing with what mean staff has been compensated for.

Executive compensation is rather of import. A well planned and managed bundle can be

honoring for both the executives and stockholders. Modern research workers have proven that there is

a direct relationship between rises in stock monetary value to lift in executive compensation. There have

been incidents when stockholders had advised a rise in executive compensation when they

detect the organisation is exhibiting a hapless public presentation. The ultimate purpose of executive

compensation is to aline the involvements of executive staff and involvements of the stockholders.

Executive compensation is frequently determined by the board of managers as it is an of import

component of corporate administration.

Rejoy Mathews Cherian ( SSN 2449 ) Executive Compensation Thesis Proposal 2010

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TYPES OF EXECUTIVE COMPENSATION

Basic elements of executive compensations are

1. Basic wage

2. Bonus or short term inducements

3. Long term inducements

4. Executive benefits

5. Fringe benefits

6. Rupture bundle

Modern corporations compensate their executive staff with a basic salary plus a combination of

the above mentioned elements and referred to as entire hard currency compensation. Bonus and short term

inducements are straight related to the public presentation of the executive. If an inducement has to

considered long term the period of measuring should ever transcend one twelvemonth. In most instances

the long term incentive period is 3 to 5 old ages. Other cardinal constituents of executive bundle will

include fringe benefits like retirement programs, wellness insurance, high category agencies of transit like

executive jets, involvement free loans or possibly even a beach house. Senior executives may bask

income protection by agencies of Severance bundle which is rewarded to them if the company is

taken over or he/she loses the occupation due to assorted grounds. But this option ever facilitates the

executive to sell the company at a monetary value which is non in the involvement of stockholders.

Rejoy Mathews Cherian ( SSN 2449 ) Executive Compensation Thesis Proposal 2010

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Stock Option

During the past old ages it has been proven that stock options facilitate in alining the involvements of

the CEOs to those of stockholders. The executive can profit this option merely if the stock monetary values

remain above the expected monetary value. This option besides had a negative side as CEOs can raise the

monetary values of the stocks at the disbursal of the company ‘s long term public presentation. This option besides can

take the corporation to a failure as the CEO ‘s might be given to take high hazards in position of raising the

stock monetary values. In the Financial crisis of 2007-2009 in the United States, force per unit area mounted to utilize

more stock options than hard currency in executive wage. However, since many then-proportionally larger

2008 fillips were awarded in February, 2009, near the March, 2009, underside of the stock

market, many of the fillips in the banking industry turned out to hold doubled or more in paper

value by late in 2009. The fillips were under peculiar examination, including by the United States

Treasury ‘s new particular maestro of wage, Kenneth R. Feinberg, because many of the houses had been

rescued by authorities Troubled Asset Relief Program ( TARP ) and other financess.

RESTRICTED STOCK

CEO ‘s can besides be compensated with restricted stock which they can merely sell until certain

standard has been attained. At present compensating by agencies of stock options are going

lesser and lesser due the hazard factor involved where as the figure of companies counterbalancing

with restricted stocks have been increasing due to the less engagement of hazard. Restricted stock

besides has its negative points as the value of these stocks does non fall when the stock monetary values of the

company falls.

Rejoy Mathews Cherian ( SSN 2449 ) Executive Compensation Thesis Proposal 2010

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Tax Issue

As hard currency compensations can be nonexempt component for the executive staff it would be advisable if the

portion of their income can be converted to a long term capital addition for illustration the assorted stock

options mentioned above as they can have a better revenue enhancement intervention.

Exhibit A “ FREDERIC W. COOK & amp ; CO. , INC ”

The above graph gives you a bird ‘s oculus position of the per centum of compensation carried out by

agencies of stock options in the United States.

Rejoy Mathews Cherian ( SSN 2449 ) Executive Compensation Thesis Proposal 2010

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RESEARCH QUESTION

1. Which is the most normally used executive compensation in Bahrain?

2. What is the correlativity between the executive compensation to tauten public presentation?

3. Are top executives in Bahrain over compensated or under compensated?

4. Should direction present better compensation bundles for their top executives?

RESEARCH OBJECTIVE

Executive compensation is rather of import. A well planned and managed bundle can be

honoring for both the executives and stockholders. Modern research workers have proven that there is

a direct relationship between rises in stock monetary value to lift in executive compensation. There have

been incidents when stockholders had advised a rise in executive compensation when they

detect the organisation is exhibiting a hapless public presentation. The ultimate purpose of executive

compensation is to aline the involvements of executive staff and involvements of the stockholders.

Executive compensation is frequently determined by the board of managers as it is an of import

component of corporate administration. The aim of this research is to happen the spreads in the system

of executive compensation followed in Bahrain and suggest sweetenings.

RESEARCH METHODS

A quantitative attack will be adopted in this research. Initially a sample will be selected and

informations will be collected utilizing assorted quantitative methods. The collected informations will be so

analyzed utilizing SPSS package and decisions will be made based up on the consequences. Furthermore,

informations would be presented in statistical signifiers, charts and diagrams for better comprehensibility.

Rejoy Mathews Cherian ( SSN 2449 ) Executive Compensation Thesis Proposal 2010

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RESEARCH LIMITATION

This thesis will restrict its facts and figures from the selected sample. As executive compensation is

less accessible informations, credibleness of the information yet to have still remains a quandary.

Research BENEFICIARIES

1. Bahrain Government: To advance farther economic development of the state.

2. Corporate Administration: To guarantee steady growing of their organisation.

3. HR Professionals: Understand the market and do necessary amendments in their

patterns.

4. Share Holders: To propose and honor competitory executive direction.

LITERATURE REVIEW

This paper is intended to discourse the compensation construction of the top direction and the

house ‘s public presentation. Recent studies and surveies shows that when the house is controlled by

external portion holders the organisation is in a better place to counterbalance its top executives

than when it is controlled by an internal disposal. In today ‘s universe survey of this critical

success factor “ Executive Compensation ” is critical in assisting a house to make its peak public presentation.

Many surveies have been conducted in the field of counterbalancing employees but merely small

research has been conducted on the benefits of strategic executive compensation hence this

would be one such survey in understanding the importance of strategic executive compensation.

Rejoy Mathews Cherian ( SSN 2449 ) Executive Compensation Thesis Proposal 2010

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