The company I researched was Netflix, Inc. and I found that the CEO
(Reed Hastings) made $40,823,725 in 2021. While only $65,000 of
this was his salary, he made $39,731,118 in option awards and
$442,607 in other compensation. The average base salary of Netflix
employees as stated by Payscale.com is $110,000 per year. This
average pay is only 0.27% of the CEO's total compensation which
means Reed Hastings is earning 371 times the average employee.
While Netflix is an amazing service that offers excellent content to
it's viewers, I believe that the CEO's compensation is insanely
excessive compared to the other employees.
For the company to offer executives stock options as compensation
in place of money or the option to purchase stock is a great benefit
for both the company and the executive. The company is saving
money by not paying that extra money out and also the executive is
investing in the company while benefiting from a higher stake in the
company.
I believe that the most important audit procedures to perform in
order to verify that executive compensation is not fraudulent or
materially misstated would be to review contracts and documents
related to the executives and their pay information to include stock
options and other types of compensation. "The proposed
amendments also would require the auditors to consider contacting
persons who are involved in executive-compensation decisions but
not in financial audits — such as the compensation committee chair,
the outside compensation consultant, and human-resources
personnel — to better understand the company’s executive-
compensation structure. Auditing procedures would also target the
authorization and approval process for executive perquisites and
reimbursement arrangements." (Liazos, 2012) It is important to
ensure that there is an approval process in place and a segregation of
duties related to executives compensation.
References
AFL-CIO. (n.d.).
Highest Paid CEOs
. Aflcio.org. Retrieved September
29, 2022, from https://aflcio.org/paywatch/highest-paid-ceos
Liazos, A. (2012, March 12).
Will Auditors Influence How Executives
Are Paid?
Cfo.com. https://www.cfo.com/accounting-
