For my company, I decided to go with Amazon Inc. I chose this company because
as of late, Amazon has been having difficulty with employee turnover. They are actually
having a hard time getting people to work for them and this is coming off the heels of the
pandemic where they were making record profits due to people being unable to leave
home. When I look at executive paywatch, I see that Andrew Jassy, current CEO, has
over $212,701,169 in total compensation. This according to the website is over 6474
times the median employee’s pay for the year ending in 2021. This means that the median
pay for employees in the fiscal year ending in 2021 was $32,854.68 (Paywatch, 2022).
In my opinion, the executives are worth getting their compensation if they uphold their
fiduciary duties to the shareholders. In this case, I wouldn’t think that the CEO is worth it
because of the conditions of the work environment. Amazon has been accused of pushing
unsafe work practices and unfair conditions on their employees. A report from the
guardian follows a employee Rina Cummings and she details that “people get fired
regularly. It just takes two or three write-ups, depending on the severity. You can get
fired for anything” (I’m not a robot, the Guardian, Feb 2020).
There are benefits and costs associated with compensating executives with stock
or the option to purchase stock. Providing the executive with company stock or the option
to purchase it provides a mutually beneficial relationship between the two. When the
executive has stock options, it provides a great incentive to them to continue the
relationship, and help the company grow further. They become more invested in the
company and will be willing to do more to make sure that it is growing properly, leading
to increased profits and better business decisions. The cost of providing the executive
with stock options comes from a more ethical standpoint. Providing them with stock
options may not always cause them to be incentivized to help the business, and they could
just as easily look only for their self-interest.
Probably the most effective auditing procedures are outlined in #12-10A where
the auditor “should perform procedures to obtain an understanding of the company's
financial relationships and transactions with its executive officers. The procedures should
be designed to identify risks of material misstatement and should include, but not be
limited to (1) reading the employment and compensation contracts between the company
and its executive officers and (2) reading the proxy statements and other relevant
company filings with the Securities and Exchange Commission and other regulatory
agencies that relate to the company's financial relationships and transactions with its
executive officers” (PCAOB, 12-10A). An auditor will be able to assess the variables
listed above to determine overall fairness and risks associated with executive
compensation.
References
• Highest-paid CEOS: AFL-CIO. AFL. (n.d.). Retrieved September 27, 2022, from
https://aflcio.org/paywatch/highest-paid-ceos
• Guardian News and Media. (2020, February 5). 'I'm not a robot': Amazon workers
condemn unsafe, grueling conditions at Warehouse. The Guardian. Retrieved
September 27, 2022, from
https://www.theguardian.com/technology/2020/feb/05/amazon-workers-protest-
unsafe-grueling-conditions-warehouse
• Auditing standard no. 12. Default. (n.d.). Retrieved September 29, 2022, from
https://pcaobus.org/oversight/standards/archived-standards/pre-reorganized-auditing-
standards-interpretations/details/Auditing_Standard_12
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