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In the United States, senior managers' pay typically has three components: a fixed or base salary, a short-term or annual bonus payment, and a long-term bonus or performance payment. Both the short-term and long-term bonus payments are tied to performance measures, with the long-term bonus often taking the form of stock options. In 1996, the median CEO pay, inclusive of all forms of compensation, was $3.2 million in mining and manufacturing, $4.6 million in financial services, and, $1.5 million in utilities' (Lunnie, 2007; pg. 189). For U.S. CEOs, the fixed base cash salary represents between 20 and 40 percent of total compensation, with the fixed salary percentage being lowest among large manufacturing firms and financial services companies (a category that includes investment banks) and highest among utilities. Furthermore, the CEO's base salary as a percentage of total compensation has been dropping since 1990. However, one explanation for the reduction in fixed salaries as a percentage of compensation may be a 1993 change in the U.S. tax code that prohibited firms from deducting as business expenses nonperformance pay over $1 million to executives. Consequently, any compensation in excess of $1 million is likely to be disguised in one form or another as incentive-based pay (Carroll, 2001; pg. 121).

Managers can do two things with current year's earnings: They can distribute them as cash dividends, or they can retain them in the company. If the earnings are retained, management can use them to make additional investments or to pay down debt. The decision to pay down debt is part of the financing decision and is connected to the notion of an optimal capital structure and solving governance problems through the financial structure decision. So, setting aside the ʻpay down the debtʻ alternative, when should management retain earnings and reinvest them in the company, and when should management distribute the earnings as cash dividends ? Arguably, the best reason for paying cash dividends is that management knows that no positive NPV investments exist for the firm. Therefore, rather than keeping cash in the company, where it earns no return, the managers should distribute it to the owners of the company as cash dividends. The owners of the company can then use these cash dividend payments to invest in other companies that have positive NPV projects available to them. Thus, they would be able to create jobs and economic growth for the economy as a whole were they to receive the funds-essentially the public policy objective of a well-functioning corporate governance system . This theory is called the residual theory of cash dividends. If corporations were actually following this policy, though, we would observe much more volatility in year-to-year cash dividend payments than we do in reality-volatility that would be more akin to that observed in net income and earnings per share (Drucker, 1984; pg. 156).

The board should have audit, compensation, and nominating committees made up entirely of outside directors. The audit committee ensures that the books aren't being cooked and that shareholders are properly informed of the financial status of the firm (Levitt, 2005; pg. 109). Typically, the audit committee recommends the CPA firm that will audit the company's books, reviews the activities of the company's independent accountants and internal auditors, and 本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。