There are many facets to running big corporations. Executives of a publicly traded company have to worry about operating revenues, returns to shareholders, and maintaining a sustainable business. The leading officers of a publicly traded company are well paid of course but sometimes that pay is not enough for them. Corporate history is littered with examples of misdealing by CEOs and other executive officers. Throughout recent corporate history, these are just a couple of the ways that CEOs and other officers have padded their pockets.
1.) Stock option backdating- Executive officers are typically granted stock options each year as part of their compensation packages. The idea is that on a given date, the officer is granted an option to buy stock at a later date. The profit comes when on that later date, the stock price is higher than the option they were granted, therefore they pocket the difference in the amounts. In option backdating, the price of the option is altered so that it reflects the lowest possible price from that year, which results in the greatest profit possible for the executive.
2.) Perquisites- When executives are negotiating to join a new company, they are often able to convince the board of directors to add in extra incentives that the public may or may not be aware of. One such perk involves relocation expenses. Executives homes are purchased sometimes for more than they are actually worth. If that’s not enough, new homes are paid for with extra throw in for the travel.
These are just a couple of many ways that executives receive great and sometimes unfair pay packages. The only people who can really stand in the way of it happening is the board of directors. They are charged with monitoring executives and keeping them in check.