The objective of this research paper will be to explain to CEOs of companies on how to implement the CEO-to-Worker Pay-Ratio Disclosure. Successful implementation of the proposal will boost the elements of transparency, accountability, leadership, and strong standards of governance.
As a matter of fact, the proposal will internalize the aspects of proactive management, employee motivation, and equality within a company’s corporate governance strategy (Colley, 2009). The sub objectives are summarized below.
Modeling the compensation plan
The proposed program refers to the values of a supportive learning environment, concrete learning processes, and practices leadership that reinforce innovation (Monks and Minow, 2012).
This model will offer the motivation to acquire, bond, comprehend, and defend among the employees. The vision of the program will be to create an ideal climate for innovation and communication among the employees.
Micromanaging labor and compensation efficiency
Reflectively, the CEO-to-Worker Pay-Ratio Disclosure will give companies the authority to use a preferred statistical approach towards creating standard compensation modules for employees.
Since the variables to be considered include payroll system, line of business, location, and groups of employees, a company might benefit from the CEO-to-Worker Pay-Ratio Disclosure since it may micromanage the efficiency of the labor force from the statistical data generated.
Besides, the CEO-to-Worker Pay-Ratio Disclosure will provide a stable system of creating and managing the compensation measure in a company within a dynamic market (Deloitte Development LLC, 2013).
Therefore, the corporate governance system in a company may align the payroll to short and long term objective such as employee development (Monks and Minow, 2012).
Creating and managing benefits allocation
The third step which involves calculating of annual compensation may help the corporate governance function in a company to modify its employee benefits and the scope of the employment contract to minimize incidences of redundancy.
For instance, the “SEC clarifies that compensation elements should follow the instructions consistent with the calculation of the PEO’s total annual compensation” (Deloitte Development LLC, 2013, par. 7).
Therefore, a company will be in a position to create the employee compensation structure without having to depend on the traditional methods that are silent on market dynamics.
Significance on Corporate Governance
Since the pay ratio rule will be part of the proposed CEO-to-Worker Pay-Ratio Disclosure, the corporate governance structure of companies will have system for promoting the elements such as culture, structure, systems, leadership, and strategic alignment.
Therefore, the CEO and the corporate governance board may be in a position to create a risk management and mitigation policies, besides ensuring that a company is compliant with different regulatory obligations on compensation (Monks and Minow, 2012).
The board may allocate different teams the responsibility of full material disclosure, governance, and direct engagement in creating and managing the compensation system through the proposed CEO-to-Worker Pay-Ratio Disclosure.
Therefore, companies will be committed to compliance and adoption of standard business practices since the benefits outweighs the cost implications (Tricker and Tricker, 2012).
The proposed CEO-to-Worker Pay-Ratio Disclosure Proposed by SEC will assist the corporate governance board of a company in making transactions and business processes more efficiently and improving accounting functions in employee compensation system.
Reflectively, an efficient and systematic compensation accounting system acts as a shield against misappropriation and monitors the same (Flamholtz and Randle, 2011).
Thus, the management may find this information vital in improving monitoring systems, investor’s confidence, and inclusive structuring as the market may demand (Pearce and Robinson, 2009; Solomon, 2011).
References
Colley, J. (2009). Corporate governance. London, UK: McGraw-Hill.
Deloitte Development LLC. (2013). CEO pay ratio disclosure: what would it take to implement the SEC proposal. Retrieved from www.corpgov.deloitte.com
Flamholtz, E., & Randle, Y. (2011). Corporate culture: the ultimate strategic asset. Stanford, UK: Stanford business Books.
Monks, R., & Minow, N. (2012). Corporate governance (5th ed.). New York, NY: John Wiley & Sons.
Pearce, J., & Robinson. K. (2009). Strategic management: Formulation, implementation, and control. New York, NY: McGraw-Hill.
Solomon, J. (2011). Corporate governance and accountability. London, UK: John Wiley & Sons.
Tricker, B., & Tricker R. (2012). Corporate governance: principles, policies and practices. London, UK: Oxford University Press.