Employee compensation is essential in ensuring that the workers remain motivated. Amazon is one of the biggest retail companies in the world and, in the financial year 2021, generated revenue amounting to $469.82 billion (Executive Paywatch, 2018). The top executives at Amazon earn a significantly larger amount of compensation than a typical worker. Executive Paywatch (2018) shows that the top three executives in Amazon make over $20 million a year compared with an average of $ 32500 annual earnings for a worker. The average executive pay in the company is 20 times that of a typical worker, which is both shocking and disturbing. This is good compared to other retail companies, but the split in pay is still an issue that must be discussed.
The option of compensating managers through option grants has both positive and negative impacts. On the positive, the executive will work hard to ensure that the stock option performs well. On the downside, the executive can make a fortune by selling a stock option just before a fall because they have insider information. This arrangement to compensate through stocks also brings a conflict of interest where the executives have to choose between maximizing their incomes or acting in the best interest of workers. The best audit procedure to use would be to investigate the relationship between the amount of revenue a worker brings and that of an executive and compare their compensations. The audit procedure is the best since most executives support their high payment by arguing that they bring the most value to the organization. This method is suitable as it provides a specific direction the internal audit should take, hence a transparent, well-documented audit (Roussy & Perron, 2018). This type of internal audit would be easy to conduct since it would only include mathematical models.
I believe in the costs and benefits that I provided above. Another benefit of this type of compensation is creating a divide between senior management and workers (Aresu et al., 2022). Other benefits are increased productivity and minimization of operating costs. Additional audit procedures would be conducting analytical reviews and inspections.
References
Aresu, S., Hooghiemstra, R., & Melis, A. (2022). Integration of CSR criteria into executive compensation contracts: A cross-country analysis. Journal of Management, 014920632211102. Web.
Executive Paywatch | AFL-CIO. (2018). Aflcio.org. Web.
Roussy, M., & Perron, A. (2018). New perspectives in internal audit research: A structured literature review. Accounting Perspectives, 17(3), 345–385. Web.