Reward System and the Sarbanes-Oxley Act
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1.Would the reward system vary among manufacturers, retailers, distributors, financial organizations, et al? What other characteristics should good performance incentives have? Do those characteristics cause the implementation of incentives to differ across various functions of a company?
2.The Sarbanes-Oxley Act (Financial Reporting Act) of 2002 was passed in response the problems which surfaced with the market failures of 2000-2001, which was partially caused by senior executives in publicly-held firms routinely changing their quarterly and annual financial numbers to suit their whims rather than honestly report the condition of their organization to the public. The Act requires publicly-held companies to file annual financial reports with the signature of the firm's CEO attesting to its accuracy. The first reporting date was December 31, 2002. In the spring of 2003, two professors from a couple of New York universities were allowed to look at the filings of those companies which had complied with the filing requirement. They wanted to know which and how many companies paid the bulk of their end-of-year bonuses to the top five persons in the company, and which and how many paid the bulk of the bonuses to all of their employees. The majority paid 99% to the top five employees; only one company paid 1% to the top five employees and the remaining 99% was distributed evenly to the remaining employees down to the lowest level which was the custodians. The company was S.C. Johnson of Racine, WI manufacturers of Pledge, Scrubbing Bubbles, Windex and other popular household products. Interestingly, S. C. Johnson was the most profitable manufacturer in the U. S. that year. Any thoughts? Any reactions? Who Should be Eligible for Incentive Awards?
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Would the reward system vary among manufacturers, retailers, distributors, financial organizations, et al?
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1. Would the reward system vary among manufacturers, retailers, distributors, financial organizations, et al? What other characteristics should good performance incentives have? Do those characteristics cause the implementation of incentives to differ across various functions of a company?
It is important to understand that a reward system that a company adopts must have three main objectives: to attract new employees to the company, to encourage good work performance, and to maintain commitment to the organization. Employers who do not have good reward systems are unlikely to attract the best minds available and therefore would have a hard time competing in the current competitive market.
It would be good if the reward system were standardized in similar industries. This would make it easy to compare the percentages of company incomes that goes to company executives or those incomes that are distributed evenly between employees. However, each company is different (even if they are in the same industry) and therefore, we do not expect the companies to have the same reward system. Companies make different profits, have different chief executive officers, have different players, have different marketing strategies, have different ...
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