Ethics in Financial Responsibilities

Do you think executive compensation in its various parts (i.e., salary, stock options, severance packages) funded at the current level is unethical? If so, how would you revise the compensation so that it was just? On what basis would you change it? Does the government have a role to play? If so, in what manner?

In most companies, the top executives are paid far more than the rest of the workforce in terms of paybacks and bonuses. In most circumstances, this looks immoral since the salary disparity between typical workers is so significant. Equity and ethics have a role when it comes to executive remuneration. Executive remuneration, in my view, is ethical since it entails a variety of professional tasks and responsibilities, which are also dependent on an employee's degree of education (Greene, 2018). These incentives are one-time payments tied to specific short-term goals. The board of directors may base the bonus on various factors, such as the company's profit margins or market share, although this is not always the case.

Some regulations control the payment and enumeration of various roles in an industry or a firm that the government has the authority to create. This way, the payments provided to those in different positions may be equalized. Bonuses must be consistent with the company's payment and enumeration policies, which in this instance must be by federal legislation. This salary disparity must be appropriate to avoid discouraging other workers who don't suit the executive level (Gartenberg & Wulf, 2015). New legislation or government acts on compensation will ensure that payback is equitable for employees at all levels of the business and their professional positions.

Is the Sarbanes-Oxley Act too strict, not strict enough, or just proper? Explain.

The Sarbanes-Oxley Act of 2002, known as the public corporation accounting reform and investors' rights, is complicated for small and medium-sized public corporations to meet. According to Alase (2016), no matter how often we hear that these policies have set new benchmarks for transparency and accountability, the costs of enforcing them much outweigh any potential gains. The financial statements of publicly traded corporations are being scrutinized in a way that has never been done before. Internal and external financial accounting rules, audits, and other related expenses are primarily attributed to section 404, a relatively short part of roughly 168 words.

The Sarbanes-Oxley Act, notably Section 404, has unintended implications that are harming the economy and ultimately the financial sector of the United States (Albuquerque & Zhu, 2019). As a result of the act's implementation, enterprises have suffered a decrease in their balance sheets due to the rising expenses of compliance. Nevertheless, section 404 issues are primarily the result of regulators' implementation and independent auditors' interpretation (Hostak et al., 2013). It is not yet apparent whether the planned revisions to this provision recommended by the public corporation accounting oversight board and the securities exchange commission would be enough to stop auditors from becoming obsessive during this particular timeframe

References

Alase, A. O. (2016). The impact of the Sarbanes-Oxley Act (SOX) on small-sized publicly traded companies and their communities. Northeastern University.

Albuquerque, A., & Zhu, J. L. (2019). Has Section 404 of the Sarbanes–Oxley Act discouraged corporate investment? New evidence from a natural experiment. Management Science, 65(7), 3423-3446.

Gartenberg, C., & Wulf, J. (2015, January). Pay harmony: peer comparison and executive compensation. In Academy of Management Proceedings (Vol. 2015, No. 1, p. 10351). Academy of Management.

Greene, R. J. (2018). Rewarding performance: Guiding principles; custom strategies. Routledge.

Hostak, P., Lys, T., Yang, Y. G., & Carr, E. (2013). An examination of the impact of the Sarbanes–Oxley Act on the attractiveness of US capital markets for foreign firms. Review of Accounting Studies, 18(2), 522-559.