Part One

In the compensation policy discussion, the main focus is going to be on the corporate governance profession. Therefore, the main individuals involved are management-level employees such as Chief Executive Officers (C.E.Os), Chief Finance Officers (C.F.Os) and Chief Operating Officers (C.O.Os). Usually, management-level employees provide a connection between other lower-level employees and the board of directors that represents the interests of the shareholders. Consequently, their roles are crucial to the success or failure of the company.

Due to the importance of executive-level employees, it is vital that a company can attract and hold on to the talent that it requires to succeed. Sound compensation policy is a big factor that ensures that a company can acquire and maintain the desired personnel. Firstly, the compensation policy should be incentive-based. Incentives that are tied to ultimate goals can motivate executives who ultimately influence other low-level employees. Secondly, the compensation policy should be flexible and thus subject to review after a certain period. Consequently, the company will be able to make adjustments in accordance with the changes it experiences. Moreover, the compensation policy should be communicated transparently within the company thus ensuring a thorough understanding of the measures being employed.

The response displayed above conforms to libertarian ideology. The incentive-based approach brings individuality into play because each employee has his or her own set of goals that are different from another employee. Consequently, the amount of compensation each person receives is modified according to the role that each plays. However, the goals described should always be in line with the company’s performance.

Part Two

The incentive-based approach received support from other members of the group. It was seen as a way of rewarding executive-level employees for their hard work. Moreover, the method has been widely employed throughout the corporate world which has rendered a considerable amount of success. However, for some businesses, this model fails to work due to specific challenges that were raised by the group members.

First, confusing and unambiguous metrics that are described in the compensation policy often lead to failure. Vagueness in a compensation benchmark may lead to an employee always missing his or her targets. Consequently, the individual becomes demoralized contrary to the objectives of the incentive-based policy. Furthermore, confusing metrics can lead to a conflict of goals between individuals of the same company.

Throughout the discussions, it was clear that the impact of incentive plans was positive for the company. First, incentives influence the loyalty of an executive to a company. Good compensation plans give employees a feeling that he or she is appreciated for his or her effort. Therefore, he or she is likely to put more effort into work. Secondly, effective compensation through incentives reduces employee turnover. Therefore, companies enjoy stability in leadership positions over an extended period. Furthermore, companies can save time and resources that would have been used to recruit new executives. Finally, incentives build a competitive atmosphere among different companies that are involved in the same industry. The competition arises from each company trying to improve employee welfare to attract top talent in executive positions. Therefore, the needs of employees are addressed adequately. In summary, the majority of the group expressed support for the incentive-based approach that was proposed in the discussion forum because its merits have shown better results over time.

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