SALARY CAP: PROFIT OR RISK FOR THE COMPANIES

Salary Cap: Profit Or Risk For The Companies

Acknowledgement

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

Table of Contents

ACKNOWLEDGEMENT2

ABSTRACT4

CHAPTER 1: INTRODUCTION5

Background5

Research Objectives5

Aims Of The Research5

Rationale Of The Research6

CHAPTER 2: LITERATURE REVIEW7

Linking organizational and human capital factors to executive compensation15

RBV and CEO compensation17

Human capital factors24

CHAPTER 3: METHODOLOGY29

Research Design29

Data Collection29

Data Analysis30

CHAPTER 4: RESULTS31

CHAPTER 5: ANALYSIS AND DISCUSSION52

CHAPTER 6: CONCLUSION62

Future research directions65

REFERENCES66

APPENDIX76

Abstract

In this study we will try to explore the concept of salary cap in a holistic context. The main focus of the research will be on salary cap and its relation with company's risks and profits. The research also analyzes many aspects of salary cap and tries to gauge its effect on company's risks and profits. Finally the research describes various factors which are responsible for salary cap and tries to describe the overall effect of salary cap on company's risks and profits.

Chapter 1: Introduction



Background

The reduction of executives and CEO costs has become a top priority in virtually all social insurance reforms in the time of economic crisis (Hering, 2008:77-84). This paper will aim to discuss the levers politicians can theoretically manipulate to executives and CEO costs without undermining the equilibrium between profit and risks in companies. As executives and CEO salaries is by far the most important motivator, the argument focuses on the financial balance of salaries. The paper will go on discussing in detail the various reforms that have been implemented during the past decade, and in particular the most recent salary cap policy implementation that seeks to introduce a privately administered funded element into the statutory scheme.

Research Objectives

The objective of the proposed dissertation is to identify the possible company's risks and profits to the Obama's salary cap policy on the US firms.

Aims Of The Research

The following aims will be highlighted in the proposed dissertation:

How would salary cap policy effect market in general?

Due to the salary cap implementation, what are the profits and the risk taken by the companies?

What could be the challenges faced by the CEO of the companies, due to the implementation of the salary cap policy?

Rationale Of The Research

The economic crisis has created a monetarist and institutional context in which political actors and collective actors in the labour market have become convinced that the reduction of executives and CEO's costs creates more profit and less risks for the company. Salary cap is thus perceived as a positive sum game in which cuts in salary and benefits provisions are compensated for by expected improvements in the labour market. Hence, the topic is chosen to know the risks and profits of the company, associated with the salary cap policy implementation.

Chapter 2: Literature Review

The explosive development of performance-based executive reimbursement was a prominent attribute of the late twentieth-century financial view, and was for the most part commended by economists as a way to align the inducements of managers with the interest of ...