• Executive compensation is commonly known as executive pay.
It is the amount of remuneration package specifically designed
for the business leaders and top management members of an
organization. Executive compensation encompasses elements
such as salaries, incentives, perks and insurance. The executive
remuneration of the CEO of Apple Inc. organization has been
considered to compare with the median salary of the
organization’s employees. In the year 2021, the salary of Cook
was USD 3 million. But he received additional benefits in the
form of stock awards worth USD 82.3 million, USD 12 million
for achieving the targets of the company and USD 1.4 million
for air travel. Apart from these elements, his remuneration also
included insurance premiums and 401 (k) plan. In total, Cook
earned USD 98.7 million as executive remuneration in 2021
(The Hindu, 2022). The average remuneration package of the
average staff of the organization during the same year was USD
68,254. While comparing both the salaries together, it was
ascertained that Cook’s salary was 1447 times higher than the
average salary of Apple’s employees. The high remuneration
difference is not worth it. Even though Cook has been showing
strong potential as the leader of Apple, his executive
compensation is excessive.
• The main costs associated with compensating executives with
stock or the option to purchase stock include the high cost that
the business has to bear, and an employee has to rely on
collective or team output in order to receive a bonus. The main
benefits of compensating executives with stock or the option to
purchase stock include boosting employee morale, introducing
flexibility in the remuneration structure and empowering
employees as they have the right to buy the stock of the
company for a specific price at a particular time (Athar, 2020).
• The most effective audit procedure that can be adopted in order
to identify abuse or fraud of executive compensation is carrying
out in-depth risk assessment procedures in the organization to
check and compute the executive compensation and its
alignment with other financial elements. According to the Public
Company Accounting Oversight Board (PCAOB), it is the
responsibility of an auditor to identify as well as assess the risks
relating to material mismanagement. The auditor must carry out
procedures for getting a detailed understanding of the
company’s financial relationships along with transactions with
its executive officers (Auditing standard no. 12. Default, 2021).
The auditors must uncover how the executive compensation
has been ascertained and its impact on the profitability of the
business (Alhadab, 2018).
References
Auditing standard no. 12
. Default. (2021). Retrieved September 29,
2022, from https://pcaobus.org/oversight/standards/archived-
standards/pre-reorganized-auditing-standards-
interpretations/details/Auditing_Standard_12
Alhadab, M. (2018). The impact of executive compensation and audit
quality on accrual-based and real-based earnings management:
Evidence from Jordan.
Corporate Ownership and Control
,
15
(2-1),
209-219.
Athar, M. (2020). Employee Stock Option Plans: A Meta-Analysis
(Understanding Impact of Esops Through Literature).
Studies in
Business and Economics
,
15
(1), 100-114.
The Hindu. (2022, January 8).
Tim Cook earned over 1,400 times the
average Apple Worker in 2021
. Return to frontpage. Retrieved
September 29, 2022, from https://www.thehindu.com/sci-
tech/technology/tim-cook-earned-over-1400-times-the-average-
apple-worker-in-2021/article38183708.ece
