Business
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Question 1
Say on pay policies is a new government mechanism, being used in allowing shareholders to vote for the suitability of executives’ compensation. Say on pay mechanism was implemented by Dodd-Frank, and corporations have implemented it for various reasons. Corporations implement this policy because it aligns CEOs’ compensation, and through the alignment, it helps reduce overcompensation of CEOs and owner-managers in a company (Lozano-Reina & Sánchez-Marín, 2020). It is also implemented because it helps reduce potential conflicts that can arise from the compensation of CEOs.
Clawback policies are a policy set by an organization, and this policy involves the already paid employee returning money to an employer with a penalty. It occurs in case of misconduct, the poor performance of the employee, among others. Corporations have implanted the clawback policy because it allows the company to cover CEOs’ incentive pay if misconduct or any issue arises in financial reports (Babenko et al., 2017). Corporations also implement the policy because it acts as a form of insurance, especially when the company needs to respond to any crisis like fraud or when the company sees a drop in its profits. It also implements it because it puts employees on their toes, which makes them perform their duties well since they do not want to face the policy’s consequences. In turn, the corporation’s productivity increases. Corporations implement the policy because it helps restore the faith and confidence of investors. So the investors are not afraid of any losses since losses will be catered for by the involved party by the party paying off the money lost.
Question 2
Companies that focus on keeping their employees happy through the benefits they offer, in turn, make them very successful. Companies choose to offer their employees benefits for various reasons. First, through the benefits, the companies appeal is increased, which makes the business attractive, taking the attention of the most skilled and educated employees to the company, which helps differentiate the company from the masses.
Second, the benefits offered will help minimize the turnover rate, and in this, the company will be able to retain the talents of its employees for a long time. Investing in employees makes the employee feel that the company values their performance and has the best interests; thus, the turnover rate is minimized (O’Brien, 2003). Third, it is also because benefits increase employees’ morale and motivated employees lead to increased productivity of the company since the employees will be dedicated to their jobs, which creates loyalty of employees to the company. Forth, companies choose to offer benefits to their employees because the benefit of health insurance, for instance, will lead to healthier employees, and this will help days off taken by sick employees since all employees will be healthy enough to perform their duties daily.
United States government established particular legally required benefits to employees, and the government established the benefits for various reasons. The legally required benefits include health insurance, workers’ compensation, unemployment insurance, family, and medical leave (Summers, 1989). Health insurance benefit was established to protect employees’ health by organizations providing medical cover for its employees. Through the unemployment compensation benefit, employees are safe even if they lose their job or disabled. The workers’ compensation will help give financial assistance to people, especially when they are not able to work as a result of injury or illness at the workplace.
References
Babenko, I., Bennett, B., Bizjak, J. M., & Coles, J. L. (2017). Clawback provisions. Available at SSRN 2023292.
Lozano-Reina, G., & Sánchez-Marín, G. (2020). Say on pay and executive compensation: A systematic review and suggestions for developing the field. Human Resource Management Review, 30(2), 100683.
O’Brien, E. (2003). Employers’ benefits from workers’ health insurance. The Milbank Quarterly, 81(1), 5-43.
Summers, L. H. (1989). Some simple economics of mandated benefits. The American Economic Review, 79(2), 177-183.