Andrew “Andy” Jassy is the current CEO of Amazon.com, Inc
(AMZN) and his total compensation package for fiscal year ending
2021 was $212,701,169. His base salary is reported at $175,000
compared to the median worker pay of $32,855. Andy earns 6,474
times the median employee’s pay. He was granted 61,000 shares of
stock when promoted to CEO after Jeff Bezos stepped down in July
of 2021.
Link - https://aflcio.org/paywatch/company-pay-ratios
The CEO-to-worker pay gap has been vastly different for decades.
Andy's base salary seems average; however, I do not believe he is
worth the complete compensation package. The 61,000 shares of
stocks award to him have changed the course of his life forever, while
employees are stilling fighting to maintain themselves with low
compensation, while getting the job done daily.
An executives compensation package is designed specifically for
business leaders, senior management and executive-level employees
of the company. Stock options gives the executive an option to buy
and sell company stocks at a price mutually agreed upon. The costs
and benefits associated with compensating executives with stock or
the option to purchase stock is that it is a cost-effective company
benefit that creates a lucrative employment package which is
intended to be attractive for the executive. This offers the executive
an opportunity to have ownership in the company, which allows them
to feel connected to the organization and their co-workers.
Stock options gives the executive an incentive to act more like an
owner because having a personal stake in the business, can give the
executive the opportunity to work hard towards increasing the
profits and boost the share price of the company. A company may
benefit from compensating its executive with stock or the options to
purchase stock because it is typically a part of an executive
compensation package, and it is an incentive for the executive to
perform in their best interest as well as for the shareholders. An
executive compensation package is important to the shareholder
because an executive who fails to increase profit or boost
performance can eventually cost the shareholders.
I believe the most effective audit procedure to use to identify
executive compensation abuse or fraud is the procedure for
identifying risks of material misstatement. In accordance with
PCAOB, auditing standard #12, procedure reviews the executives
compensation and employment contract to determine if they are fair
and legal. The auditor should identify and evaluate whether the
identified risks relate pervasively to the financial statements as a
whole and the assertions that they directly affect.
References:
CEO and Executive Compensation Practices in the Russell 3000 and
S&P 500
. (2021, October 7). The Harvard Law School Forum on
Corporate Governance. Retrieved September 28, 2022, from
https://corpgov.law.harvard.edu/2021/10/07/ceo-and-
executive-compensation-practices-in-the-russell-3000-and-sp-
500/#:%7E:text=In%202019%2C%20stock%20options%20com
prised,for%20both%20CEOs%20and%20NEOs.
Day, M. (2022, April 1).
Amazon CEO Andy Jassy’s Pay Package Was
>12 million
. Bloomberg. Retrieved September 27, 2022, from
https://www.bloomberg.com/tosv2.html?vid=&uuid=f0a22b31
-3eb9-11ed-a027-
687674707243&url=L25ld3MvYXJ0aWNsZXMvMjAyMi0wNC
0wMS9hbWF6b24tY2VvLWFuZHktamFzc3ktcy1wYXktcGFja2
FnZS13YXMtMjEyLW1pbGxpb24taW4tMjAyMQ==
Executive Compensation | Investor.gov
. (n.d.). Retrieved September
28, 2022, from https://www.investor.gov/introduction-
investing/investing-basics/glossary/executive-compensation
Girous, G. (2014).
Executive Compensation: Accounting and
Economic Issues
. Business Expert Press. Retrieved September
28, 2022, from
https://ezproxy.snhu.edu/login?url=https://search.ebscohost.c
om/login.aspx?direct=true&db=nlebk&AN=924874&site=eds-
live&scope=site
Hess, A. J. (2021, September 15).
In 2020, top CEOs earned 351
times more than the typical worker
. CNBC. Retrieved
September 27, 2022, from
https://www.cnbc.com/2021/09/15/in-2020-top-ceos-
earned-351-times-more-than-the-typical-worker.html
Messier Jr., W. F., Glover, S. M., & Prawitt, D. F. (2017). Auditing &
assurance services: A systematic approach. In
No Title
(10th
ed.). New York, NY: McGraw-Hill Education.
Novet, J. (2021, July 2).
Amazon grants 61,000 shares of stock to
incoming CEO Andy Jassy
. CNBC. Retrieved September 28,
2022, from https://www.cnbc.com/2021/07/02/amazon-
grants-61000-shares-of-stock-to-incoming-ceo-andy-jassy.html
Paywatch. (n.d.).
Amazon.com, Inc.
Aflcio.org. Retrieved September
27, 2022, from https://aflcio.org/paywatch/company-pay-
ratios
PCAOB. (n.d.).
Auditing Standard No. 12
. Default. Retrieved
September 28, 2022, from
https://pcaobus.org/oversight/standards/archived-
standards/pre-reorganized-auditing-standards-
interpretations/details/Auditing_Standard_12
SNHU Shapiro Library. (2021, February 4).
Jeff Bezos to step down as
Amazon CEO.
TradeArabia [Manama, Bahrain], NA. Retrieved
September 28, 2022, from
https://link.gale.com/apps/doc/A650625248/STND?u=nhc_ma
in&sid=ebsco&xid=b097a957
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