Benjamin Franklins Influence on America - 444 Words

According to History.com â€Å"More than 200 years after his death, Franklin remains one of the most celebrated figures in U.S. history. His image appears on the $100 bill, and towns, schools and businesses across America are named for him.† but what’s so special about Benjamin Franklin? In this modern age of technology it’s hard to imagine a day when people went without knowing the weather forecast or looking up a fresh recipe online. It’s even harder to imagine living without fire departments, hospitals, or even electricity. And as Americans it’s hard to imagine a day when our country didn’t let women vote or used slaves. Ben Franklin lived in that day and the suffering he saw around him led him to try to resolve some new problems. Benjamin Franklin started out as a runaway with only one skill: printing; before long he found a way to provide important information to the public through his almanacs, he became a respected leader in his local community and in the scientific community, and later in his life he played an important role in American Revolution, With a lot of hard work and a commitment to helping others Benjamin Franklin became one of the most influential people in American history. From the start Benjamin Franklin was a problem solver. Not long after becoming an apprentice at his brothers printing shop when he was only 12, Franklin found a way to voice his opinion on controversial topics like the treatment of women. Knowing his brother would never polish anythingShow MoreRelatedBenjamin Franklin s Accomplishments And Accomplishments Essay1608 Words   |  7 Pages As a founding father of the United States, Benjamin Franklin had a profound and noteworthy influence on the early growth of his nation. Franklin was a prestigious author and inventor that grasped the motive to grow the economy to new heights. His autobiography is an accurate representation of his achievements and the intrinsic motivations that made him the man we think of today. Although it is biased because he writes it only through his eyes, the reader can see the differences he made to theRead MoreThe Autobiography of Benjamin Franklin1058 Words   |  5 PagesThe Autobiography of Benjamin Franklin Benjamin Franklin’s life made a huge impact on the history of America. He also was an influence for many citizens. Since Franklin lived during the eighteenth century, a period of growth for America, he also played a part in the political founding of the United States. To help future generations, Franklin wrote an autobiography of his life. An autobiography is a piece of literature about someone’s own life. He separates his into four parts, each one depictingRead MorePuritan and Neoclassical Literature981 Words   |  4 Pagesseems to be a series of lessons that Franklin learned through the course of his life. At the time of the writings, Benjamin Franklin was one of the most famous people in the world, a national treasure in his own lifetime. The autobiography then serves to influence and encourage the son through the lessons of the father. This is another trademark of American literature. Since America is a relatively young country, much of the early writings that ca me out of the nation were cautionary or educationalRead MoreThe Autobiography of Benjamin Franklin Essay1063 Words   |  5 PagesIn The Autobiography, Benjamin Franklin recounts the many paramount experiences throughout his life that shaped him into great American figure he was known to be. On the opening page, Franklin reveals the book’s epistolary format by writing, â€Å"Dear Son,† going on to admit that he’s made some mistakes in the past and to recollect that past is a way to relive it. By divulging his desire to â€Å"change some sinister Accidents Events† (Franklin 3) the author indicates how important it is for his son toRead MoreEssay on The Innovators of American Literature1066 Words   |  5 Pagesthemselves and to the American public that they influenced by their writings, Jonathan Edwards and Benjamin Franklin illustrate American themes in their personal narratives that quintessentially make part of American Literature. Although they liv ed in different times during the early development of the United States of America and wrote for different purposes, they share common themes. Their influence by their environment, individualism, proposals for a better society, and events that affected theirRead MoreBenjamin Franklin And The American Revolution1406 Words   |  6 Pageseven their lives. One of these men was Benjamin Franklin. Benjamin Franklin’s life was intertwined with that of America’s life. The more notable of his works is his printed items such as â€Å"Join or die†, The Declaration of Independence and U.S. Constitution, and â€Å"Magnus Britannia†. Benjamin was the catalyst for the American revolution through his printing business and ventures. Benjamin Franklin was born in Boston, Massachusetts on January 17, 1706. Benjamin Franklin was the son of Josiah FranklinRead More Benjamin Franklin Essay1215 Words   |  5 Pages If ever a story embodied what has come to be known as the American Dream, it is the life story of Benjamin Franklin. Franklin could be considered a passionate and energetic man who motivated himself by self-determination and a strong work ethic to achieve self-improvement. Beyond his sometimes-lofty personal aspirations to attain self-improvement, Franklin’s deep conviction inspired him to help others live well. He demonstrated this conviction in his reasons for writing, hisRead MoreBenjamin Franklin And John Winthrop1651 Words   |  7 PagesBenjamin Franklin and John Winthrop, men with different ideals, present the same notion that America should be presented as a â€Å"city upon a hill.† Franklin believed that the American dream should be presented as an ideal where men and women are equal and can both move up in social class on their own, practicing any religion they desired. On the other hand, Winthrop believed that the new world was a religious safe haven only for the Puritans. American Exceptionalism was overall the main focus, guidingRead MoreBenjamin Franklin And His Life Essay2196 Words   |  9 PagesThere were many astronomically brilliant men that had a hand in shaping the United States of America; however, the single man that made the brilliance of the other men dim from brilliantly bright star light to the faint glow given off by a glow worm by comparison was none other than Benjamin Franklin. Benjamin devoted most of his life to helping America form, and he fulfilled nearly any role that was required of him while still maintaining who he was as an individual. Despite the seemingly life consumingRead More Individuality in Whitmans Song of Myself Essay1260 Words   |  6 Pageswhich the authority was Inner Light. Whitman h imself was not only personally familiar with, but deeply impressed by, a religion whose only authority was the Inner Light (Canoy 481). The Inner Light is a special influence, which made Whitmans poetry unique. This certain influence did such things as guide Whitman down his soul searching path as well as help him define within himself the characteristics of an individual. In section fifteen of Song of Myself, Whitman discusses people from every

The Issue Of Gun Control - 1288 Words

The issue of gun control is one the most heavily debated topics in today’s society. With the increase in school shootings starting around the turn of the century, gun control advocates have been blaming guns instead of the deranged people for these heinous acts, and been calling for the banning of guns for civilian use. Gun control would be harmful in today’s day and age where people don’t have complete trust in the government and the police and where gangs are very prevalent especially in urban areas along with the growing number of school shootings over the last 20 years. We the people need to fight for our rights to bear arms to protect ourselves against our government and for personal protection of ourselves and the community.†¦show more content†¦This shows that the 2nd amendment was created to protect ourselves against an oppressive government and for personal self defense. Any argument against is unconstitutional and infringes upon our rights. It makes sense to some people that since murder rates are so high nowadays, that banning guns would make the numbers much lower. That is certainly not the case when it comes to the United Kingdom, our close allies, when they created the Second Firearms Act of 1997. They created this law in response to the Dunblane massacre, where a man walked into an elementary school and shot dead 16 children, and one teacher before killing himself.The culprit committed these murders t with 4 handguns.People thought this act would help lower the murder rate but the results couldn t be farther from what was expected. ,the rate of intentional murderin Dunblane in 1996(the year of the Dunblane massacre) was 1.12 per 100,000 people.It raised to 1.24 in 1997, the year the Firearms Act went into effect and went even higher to 1.43 in 1998. The rate rose to a peak of 2.1 in 2002 and has fallen since to 1.23 as of 2010. These lower numbers are questionable due to the possibility of underreporting of crime by U.K. police.. In 2005, there were 765 intentional murders in the UK and most of these were committed with knives.

Browning Peal Essay Free Essays

Browning PEAL Essay Robert Browning uses many techniques one such example being his continuous reference to women being similar to roses. Browning uses the imagery of roses throughout the poem to represent women and femininity. It is a common practice in literature for poets to refer to women as flowers, in particular roses; such as Browning has done in ‘Women and Roses’. We will write a custom essay sample on Browning Peal Essay or any similar topic only for you Order Now This is because they represent natural beauty that has been created by God, which compliments the woman Browning is talking about because it shows his feelings on how he believes they don’t have to try to be beautiful. Roses also represent love and passion, the colour red is an intimate colour that represents seduction and sometimes danger as seen in ‘Of Mice and Men’ where Curley’s wife is referred to as having â€Å"full rouged lips† and â€Å"red fingernails†. The thorns on roses continues this theme of potential risk, because the simple idea of men picking roses for women could injure the man due to the thorns on the stem, this could represent how men have to fight past the hard things in love to get to the beauty or the woman. In ‘Women and Roses’, Browning also uses roses as a representation of the stages through a woman’s life going into womanhood and how she grows from a young shoot full of promise to something incredibly beautiful and natural and eventually to an old and wilted flower, â€Å"bees pass it unimpeached†. The poem is about finding perfect love with a woman, which is represented as finding a rose with no thorns, thorns being the trouble in a relationship or a woman. Browning wrote ‘Prospice’ after his beloved wife, Elizabeth Barrett Browning, died in 1861. The poem shows Browning’s beliefs on death and how he feels that he will once again be reunited with his love in the afterlife. The title ‘Prospice’ can be translated as ‘look forward’, and in this poem, published in 1864, Browning is most likely looking forward to death, when he expects ‘I will clasp thee again’, meaning he will be with Elizabeth once more. Such optimism seems to contrast noticeably with the religious doubt or searching of many Victorian writers. But Browning does not claim that there is anything easy about facing death, instead he shows one way of coping. He gives the ‘Arch Fear’, death, a ‘visible form’ so that he can imagine taking him on in one last fight to show that he will not be taken easily, ‘Barriers’ and ‘guerdon’ suggest a tournament took place. In ‘A Woman’s Last Word’ Browning uses Roman numerals to show the breaking down of a omplex subject such as a woman’s feelings after an argument. By doing this it makes it easier for the reader to follow and distinguish the different stages of feelings the character goes through and also shows the changes in direction of her attitude until she reaches submission towards her love. This is a good technique used as he wrote the poem from a woman’s point of view and has gone into a lot of detail on how she feels and reacts to the argument. How to cite Browning Peal Essay, Essay examples

Apollo an Olympic God Essay Example For Students

Apollo: an Olympic God Essay After Zeus Apollo is said to be the most powerful of the Olympian gods. He is referred to as the god of youth, music, poetry, and oracles. During the Hellenic age he was also called the god of healing and purity. Apollos Father is Zeus and his mother is Leto. He has a twin sister named Artemis and he had a son named Asclepias to his wife the nymph Coronis. Apollo also had another son with the muse Calliope named Orpheus. Asclepias would later be known as the god of healing. Apollo was born on the island of Delos, where his mother fled to escape the wrath of Hera. From Birth Apollo was proficient in the use of sun shafts, his deadly invisible arrows, which he hurled against his enemies. One of his earliest battles was killing The Python a monstrous serpent at a very young age that guarded the oracle. Apollo also killed the three Cyclopes for having forged thunderbolts used by Zeus to kill Asclepias. As a punishment Zeus made Apollo a servant of a mortal for a year. Apollo also created a storm on the Corinthian Sea, then appeared in the form of a dolphin and led a ship in distress safely to the shore. There he transformed himself into a brilliant star and guided the mariners to Delphi were the mariners founded on of the greatest shines of the ancient world. As Apollos followers grew he became know as the god o Spiritual light and worshiped as the averter of evil and the protector of orderliness, simplicity, purity, and reasonableness. In homers Novel the Iliad Apollo took the Trojans side of the war and rained arrows down on the Greek encampments. Apollo is also of said to of guided Pariss arrow into Achilles heel. According to Greek mythology Apollo was a very vengeful. On one occasion There was a satyr named Marsyas that challenged Apollo to a music contest. When Marsyas lost Apollo had him flayed alive. In his memory, the blood and tears of Marsyas and his friends formed a river that was named after him. Another tale of Apollo vengefulness is from Homers Iliad when a mother of 12 children compares herself to Leto Apollos mother. Apollo and Artemis kill all 12 of her children with arrows. Apollo was not just a fighter he had 6 loves. Daphne his first love fled from him and was turned into a laurel which is sacred to Apollo. Another one of his loves was Cassandra who Apollo gave the gift of Prophecies. When Cassandra refused him he turned her gift into a curse. Then there was Calliope who gave him the child Orpheus and Coronis who gave him his son Asclepias. Sibyl of Cumae rejected Apollo and became another victim of his anger. Apollos cult at Delphi was the religious center of the Greek world. His oracles were widely consulted on all matters. The oracles would sit on a tripod  chair above an opening in the ground and in a trance they would mutter words claimed to be the word of Apollo. Now days Apollo is considered the god of law and orderliness and is worshiped every may to celebrate and give thanks for the renewal of vegetation. The Pythia is held every fourth or eight summer different sources said different dates to honor Apollos victory over the Python.

Are You Smart Enough to Work at Google Essay Example

Are You Smart Enough to Work at Google Essay Are you Smart Enough to Work at Google Emerald | Are you Smart Enough to Work at Google: Fiendish Puzzles and Impossible Interview Questions from the Worlds Top Companies European Journal of Training and Development Article Information: Are you Smart Enough to Work at Google: Fiendish Puzzles and Impossible Interview Questions from the Worlds Top Companies To cite this article: David McGuire, (2013) Are you Smart Enough to Work at Google: Fiendish Puzzles and Impossible Interview Questions from the Worlds Top Companies, European Journal of Training and Development, Vol. 7 Iss: 5, pp. 502 504 To copy this article: [emailprotected] com The Reviewers David McGuire, School of Management, Edinburgh Napier University, Edinburgh, UK RR 2013/2Review Subject: Are you Smart Enough to Work at Google: Fiendish Puzzles and Impossible Interview Questions from the Worlds Top Companies William Poundstone Publisher Name: OneWorld Publications Place of Publication: Oxford Publication Year: 2012 ISBN: 9781851689170 Price: ? 8. 99 ($12. 6), paperback Article type: Review Pages: 290 pages Keywords: Emerald Journal: European Journal of Training and Development Volume: 37 Number: 5 Year: 2013 pp. 502-504 Copyright:  © Emerald Group Publishing Limited ISSN: 2046-9012 Book synthesis With a subtitle of â€Å"Fiendish Puzzles and Impossible Interview Questions from the Worlds Top Companies†, this text sets out to explore the evolving approaches taken by the worlds leading companies to recruiting and selecting the most creative and innovative staff.With companies such as Google receiving over one million job applications a year, organisations are looking for more sophisticated and original ways of zoning in on the most skilled applicants and rejecting unsuitable job-seekers. In the current recessionary and cost-cutting environment with many organisations becoming over flooded with applications for all positions, the use of unconventional interview questions and the practice of g etting job applicants to solve complex abstract problems has become more mainstream.Yet, to date, few insights have been given into how leading organisations have effectively redesigned selection strategies to promote core creativity and innovation values. The text is structured into ten chapters. The first chapter sets the context for the remainder of the text, examining how Google in particular is leading the field in the use of psychological testing for creativity, imagination and invention. Poundstone argues that Googles approach to encouraging creativity has led to revenue-boosting projects such as Gmail, Google Maps, Google News, Google Sky and Google Voice.Chapter 2 provides a brief history of the tools and techniques used by human resource departments in recruitment and selection and discusses the move away from job interviewing towards more innovative approaches to attracting the most creative staff. Chapter 3 looks at the effect that the credit crunch and recession have ha d in mainstreaming unconventional interviewing approaches. One such approach outlined relates to the â€Å"airport test†, which asks interviewers to â€Å"Just think about if you got stuck in an airport with the (job candidate), on a long layover on a business trip.Would you be happy or sad about it? †. The book suggests that a sense of fun from a job candidate can be quite important in determining their success in securing a job. Chapter 4 looks at the significant time commitment and elaborate process that Google goes www. emeraldinsight. com/journals. htm? issn=2046-9012volume=37issue=5articleid=17089641show=htmlview=printarticlenolog=148995 1/2 8/21/13 Emerald | Are you Smart Enough to Work at Google: Fiendish Puzzles and Impossible Interview Questions from the Worlds Top Companies through to select the best job applicant.It discusses the need for job applicants to ensure that their Linkedin and Facebook profiles are appropriately maintained to help them secure a de sired job position. Chapter 5 is a short chapter that emphasises the importance of intuition as Google, like many other organisations, seek individuals who are not only technically capable, but also able to relate to individuals on an intuitive empathetic basis. The second half of the book begins with chapter six which distinguishes between classic logic puzzles, insight questions, lateral hinking puzzles, Fermi questions and algorithm questions. Chapter 7 discusses the use of whiteboarding and how getting individuals to chart their thoughts can give interviewers a useful insight into the thought processes of job candidates. Chapter 8 is a short chapter which gives readers an insight into a style of questioning developed by Enrico Fermi at the Los Alamos National Laboratory (famous for making the atomic bomb). Fermi questions test job candidates analytical skills and include questions such as â€Å"How many golf balls would fit in a stadium? Chapter 9 focuses specifically on algori thm questions and provides readers with guidance about how to answer such questions. The final chapter provides some strategies to job applicants on how to salvage a doomed interview. It offers suggestions such as brainstorming, critiquing, analogising and disambiguating. Evaluation Providing an in-depth insight into the approaches being taken by the worlds top employees in attracting the best staff is invaluable to job applicants, HR staff involved in resourcing and University professors tasked with teaching students on contemporary selection techniques.The book provides lots of examples from leading companies such as Google, Microsoft, Nordstrom and Apple. The book is particularly suited to individuals who enjoy puzzles and possess an analytical mathematical mind. Such individuals will enjoy the challenge of solving such problems and may be likely to grab a pen and some paper to work on calculations and problemsolving approaches. Each chapter begins with a context-setting story wh ich often takes the form of an interviewee struggling to solve a complex question or puzzle posed by an interviewer.The story provides a useful transition to exploring changes in how new employees are selected and how companies are deprioritising IQ and focusing instead on the creativity and analytical skills of applicants. At times, the discussion in the text can become overly technical and would benefit from a stronger, more descriptive narrative. One key benefit of the book however is that it contains 120 pages of answers and detailed explanations to the puzzles and riddles outlined in the text. This will be a great benefit to ambitious individuals who want to prepare for interviews in leading global organisations.In the authors own words â€Å"The great physicist Richard Feynman once applied for a job at Microsoft. ‘Well, well Dr Feynman’, the interviewer began. ‘We dont get many Nobel Prize winners, even at Microsoft! But before we can hire you, theres a sli ght formality. We need to ask you a question to test your creative reasoning ability. The question is, why are manhole covers round? ’ ‘Thats a ridiculous question’, Feynman said. ‘For one thing, not all covers are round. Some are square! ’ ‘But considering just the round ones, now’ the interviewer went on, ‘Why are they round? ’ ‘Why are round manhole covers round?!?!Round manhole covers are round by definition. Its a tautology! ’. The interviewer then left the room for ten minutes. When he returned he announced, â€Å"Im happy to say that were recommending you for immediate hiring into our marketing department† (p. 69). Printed from: http://www. emeraldinsight. com/journals. htm? issn=20469012volume=37issue=5articleid=17089641show=html on Wednesday August 21st, 2013  © Emerald Group Publishing Limited www. emeraldinsight. com/journals. htm? issn=2046-9012volume=37issue=5articleid=17089641show=htmlview =printarticlenolog=148995 2/2

Chang Dai-Chien essays

Chang Dai-Chien essays Chang Dai-Chien is known for his skill of imitating traditional Chinese historical artists. He borrowed techniques from the diversity of Chinese art. Upon my arrival at the gallery the atmosphere of ancient epoch created by the paintings presented at the art show impressed me very much. The atmosphere of a different era was utterly amazing considering the fact that Chang Dai-Chien was a modern painter. The brush paintings, seen at the exhibition, were very interesting for several reasons, however the ones that appealed to me the most were symbolism and the imagery of the paintings. The importance of symbolism in Chinese Art is immense. It reveals and subsequently portrays cultural attitudes, conventions and events of a certain period of time, which makes the paintings not only the exquisite works of art but also a retrospective of history of China. Chang Dai-Chien was an acclaimed genius of his genre because he had an incredible ability to revive the atmosphere of the past. One painting that had a huge impact on me was Lofty Scholar Beneath the Pine (1982). It portrayed a man standing beneath the tree, contemplating. Even though it might sound like a very simple theme, the insight into its meaning brings about much more than can be said. The smoky clouds in the painting, the misty, dim peaks of the mountains set a mood of mystery; a scholar looking at the mountain peaks, at the beautiful pine tree adds a touch of enigma. The use of pastel tones of the clouds and mountains helps to support and reflect the symbolism of them, which can be interpreted as the mystery of the future and the unknown. Whilst the scholar may very well represent the quintessence of a human being trying to comprehend the essence of life. All of the Chang Dai-Chiens brush paintings comprise imagery that is quite symbolic, i.e. paintings such as White Pigeon Among White Leaves and Cloudy Waterfalls and Summer Mountains&qu...

Timed essay Example | Topics and Well Written Essays - 1500 words - 1

Timed - Essay Example Individuals within the hard sciences would point to the fact that the World Wide Web has promoted education and prompted a level of dialogue and discussion that would otherwise be constrained to specific scholarly journals. In terms of political science and governance, the World Wide Web has created a dynamic in which democracy and freedom of expression has come to be something that is expected by many individuals throughout the world. Furthermore, in terms of equality, gender rights, and the prevalence of violence, the Internet has assisted in seeking to reduce stereotypes and promote a more thoughtful level of engagement with respect to the individual rather than the group that they are supposed to be a member of. In short, the Internet has been a transformative force on each and every level; so much so that societies that have engaged with a high level of Internet use are invariably those that are among the most educated and fastest developing. However, all of this leads to a fund amental question; namely what the impact of the web has for the developing world. Firstly, with respect to issues of education, the impact is extremely powerful. Inquiring minds, educational facilities, and institutions within developing countries can provide invaluable resources to those that seek further education within their own sphere. Taking an example of rural schools within India or South Africa as a case in point, the reader can quickly appreciate the fact that these students have a wealth of resources, if they are connected to the web, that they might not otherwise have as a function of their own government education program or the texts/materials that they are required to read and understand as a function of their studies (Simons, 1998). Another relevant impact that the web has for developing countries is contingent upon the way in which it creates a further level of health understanding; both

The Bound between Corruption and Guanxi in the Chinese Society Coursework

The Bound between Corruption and Guanxi in the Chinese Society - Coursework Example The current state of literature provides an insight into what Guanxi is and how it works. Understanding the meaning of Guanxi is of vital importance for everyone who seeks to look deeper into the significance of corruption in the Chinese business system. Surprisingly or not, different authors provide different meanings of the term Guanxi. However, these differences are natural and even anticipated, given the complexity of the Guanxi concept and the multitude of meanings which it comprises. According to Chatterjee, Pearson, and Nie, the Chinese definition of Guanxi is hard to translate in one phrase – countless meanings are included in it, and it is fairly considered as one of the most impactful phrases in Chinese business contexts. However, it is possible to say that Guanxi can be roughly divided into the three basic groups of meanings: first, Guanxi presupposes the development of a relationship between people with a similar status; second, relevant and continuous connections between people; and third, contacts with people with little or no direct interactions. For the Chinese people, Guanxi exemplifies a type of special relationships in which one person needs something and another person has something to give. Guanxi is a highly dynamic form of relations between business people in China. Furthermore, even if a person who has resources and opportunities to solve a problem enters a Guanxi relationship, he (she) is not obliged to solve such a problem or respond to another individual’s request. Third, Guanxi is not a continuous phenomenon but emerges only the moment a person needs another person to do something important or solve some problem. Finally, Guanxi is almost always a sequence of previously planned activities aimed to resolve a business or personal issue. Here, western managers and people come to view Guanxi as a form of corruption, as long as such activities and relations may range from a simple meal together to giving gifts or doing favors. Â  However, whether Guanxi can be considered as a form of corruption remains a difficult question.

Golden Age of Capitalism Essay Example | Topics and Well Written Essays - 750 words

Golden Age of Capitalism - Essay Example This was a time when commerce was being revolutionized with the emergence of new technologies in transport and communication which facilitated the international markets. Railroads and steamships were used for land transportation of goods. This gave birth to the international market with goods being transported between countries such as America and England. The development of international commerce in manufactures on such a scale was only possible because of an increase in international flows of capital and the international provision of financial services (Milward 22). This was evident in post world war II economy of Europe. By 1950 more a great percentage of the income of foreign nations such Denmark was from foreign trade with other nations. The exchange rate between national currencies was stable despite the intensity among warring nations that was building up. As a result nations were able to prosper and grow economically and promote interdependence. The standard of living for ma ny citizens was at the time much better and continued to improve with the increase in the national income per capita as a result of economic success. Over the period 1950-70, the rate of growth of output in the construction sector was between 4 and 7 per cent a year over Western Europe as whole, and thus somewhat higher than the rate of growth of total output (Milward 52). This added to the success and economic dependence of nations after World War II. Thus different sectors of different nations that specialized in a trade to facilitate growth, rose considerably. The trade deficit with the dollar zone increased threefold between 1951 and 1957 (Milward 182). This increased output and western Europe had a surplus that was unprecedented. Help extended to the citizens of a nation post war was crucial in establishing the state as a means for the people to better themselves. The sweeping reform of the German pensions systems in 1955-7 , a bid by the Christian Democratic Union for a long-term middle class electoral support, had little in common, for example with the extension of public welfare in Sweden or Norway except an adherence to the view that the stability of the state required a positive response to the demand for welfare (Milward 47). This was important in conveying to the public that in accordance with the welfare policies in place, they too were to contribute to the growth of the economy in the countries mentioned. In my persp ective, this was a time of great trials and tribulations, those getting richer were foreign investors, bankers and merchants. Governments dealt a hand, and immersed their economies in the growing world market. This period thus gave rise to a flurry of new job opportunities in transportation and communication. The post-war reconstruction of nations aided by technological advancements was meant to rebuild the economy, promote industrialization and modernization. As a result of the success achieved in this endeavor, it was necessary for the governments to maintain it for purposes of achieving economic dependence. Political stability of this age put participating countries in the forefront of international trade, investments, travel and migration which increased more than any other period. It is incredible how nations were able to experience a period that was high in economic growth as a result of transportation and communication advancements. This period was unique and cannot at this time be

Executive Compensation and Stock Option in the UK

Executive Compensation and Stock Option in the UK 1 Introduction Todays highly competitive world consists of numerous corporations and these corporations are so huge and so large that it cannot be controlled by the people who own them. The control of these corporations is separated from shareholders who are the owners and vested into the hands of professional executives who are specifically hired for its management. This separation of ownership and control gave rise to agency problem or the principal-agent problem. Principal is referred to the stockholders and the agents are the executives who work for the stockholders. Although stockholders are the owners of the company to whom the executives are accountable, their actual powers are restricted except in the case of those corporations where stockholders are also the directors of that corporation. Stockholders have no right to inspect the books of accounts nor are they aware of the exact functioning and position of the firm. As a result, executives tend to work inefficiently without even bothering to look for profitable new investment opportunities, as well as they may use the firms assets for private purposes and also work to achieve their personal goals all at the expense of the shareholders. Some managers do not take any action whatever state or condition the corporation may be as they are risk averse and fear the threat of losing their job if a decision taken by them goes wrong. Therefore in order to avoid the various problems that arise due to the agency problem, executives must be properly and promptly compensated along with proper monitoring. In the beginning of 1990s, debates on corporate governance mainly focused on directors remuneration and fat cats. Fat cats are referred to those executives who provided themselves with huge compensation packages without any performance criteria. In UK, the most famous Fat Cat episode which saddened the shareholders of many large public companies and dragged the attention of the media was the notorious British Gas incident of the mid 1990s. Various issues arising out of executive compensation and the trouble of framing the deserved level of compensation, that has to be provided to an executive, made executive remuneration a main area of concern under corporate governance. According to Jensen (1993), providing the right level of remuneration to the executives and creating positive incentives in order to achieve the interest of the shareholders has been an important study conducted in many academic literatures. An improvement in corporate governance is brought about by filtering certain aspects of executive remuneration. There exists a wide gap between the remuneration paid to the executives and the remuneration paid to the other employees on the company. This gap keeps on increasing year after year as executives demand more and more for their services and decision making process to boosts the productivity and reputation of the firm which thereby increases the market price of the companys share. In a research mentioned in the Higgs Report (2003), chairmen of FTSE 100 companies in 2003 earned an average of  £ 426,000 as remuneration. Moreover, executives are being rewarded with stock options which would enrich them with abnormal profits in the future when the options granted to them are exercised. Critics argue that, executives are not worth for the remuneration paid because of their poor and unsatisfactory performance. According to Blitz (2003), MORI a leading market research company in the UK, through a survey, found 78% of the people unsatisfied by the remuneration paid to the executives. The pu blic in UK believe that executives are being overpaid for the amount of work they actually do. 2 Methodology This paper is a critical review on the various aspects of executive compensation in the UK and how the executive compensation especially the executive stock option encourage the managers and top executives, for their personal benefit, to take short term high risks and boost up the current value of shares rather than looking into the future and acting in favour of the stakeholders of the company. The tools used for the research mainly consist of various literature reviews of past articles and current working papers with some analysis of some statistical data regarding executive compensation. On the basis of the above mentioned area of research certain questions have been framed which will be critically looked into: a) Brief description of the executive compensation and corporate governance in the UK. b) Basic structure of executive remuneration in the UK and their disclosure requirements in United Kingdom. c) Are stock options considered the best means of remuneration in an executive compensation package? d) A brief historical overview of the introduction of executive stock option in the UK. e) What are the various manipulations done with executive stock option and what are the risk incentives created by executive stock option? f) Brief comparison of the UK executive compensation with the US executive compensation. g) The role of executive compensation in the UK banking towards the current financial crises. 3 Executive Compensation and Corporate Governance in the United Kingdom: During the past decade, various issues on corporate governance established the emergence of many reports and codes of best practice in the United Kingdom. These include the Inland Revenue (1988), Cadbury Report (1992), Greenbury Report (1995), Hampel Report (1998), The Combined Code (1998), Hermes Statement on Corporate Governance and Voting Policy (1998), Internal Control: Guidance for Directors on the Combined Code (Turnbull Report)(1999), Company Law Reform (1999) and Financial Services Market Act (2001) (Konstantinos Stathopoulos, Susanne Espenlaub, Martin Walker, 2003). Among these reports the Cadbury Report, Greenbury Report and the Combined Code, which emerged from the Hampel Report, focused on issues regarding executive compensation. 3.1 Cadbury Report (1992): The first guidelines of good practice on various issues of corporate governance were provided in the year 1992 by the Cadbury Committee which was established in May 1991 and was chaired by Adrian Cadbury. The Cadbury Committee discussed issues that were broader in nature than the executive remuneration but certain suggestions the committee made on altering the executive pay was accepted as permanent. The Cadbury report was titled as the Financial Aspects of Corporate Governance and came out with the Code of Best Practice, which insisted that decisions based on executive remunerations should not be made by the executive directors nor they have to get involved in making such a decision (1992, paragraph 4.42 p. 31). The report therefore recommended the appointment of a remuneration committee which will act in the interest of the shareholders of the firm and express a good opinion on various matters regarding executive compensation to the board. Companies in the UK responded spontaneousl y to this recommendation made in the Cadbury Report and established a remuneration committee within the firm (Bostock, 1995). The remuneration committee consists of a non-executive director as the chairperson and non-executive directors as its members who are all independent and free from the influence of the management. According to Williamson (I985), there always arises a question of doubt whether the directors make remuneration contracts for their own huge benefits and sanction it, if an independent pay committee does not exist. The role of remuneration committee is to ensure that executive compensation levels are set up in a formal, transparent way along with the goals required to be achieved by the executives for any schemes that are performance related. The remuneration committee can take advice from outside sources whenever necessary. The Cadbury report also suggested the establishment of an audit committee within each company which comprises of three non-executive directors (Martin Conyon, Paul Gregg and Stephen Machin, 1995). According to a questionnaire survey conducted by Conyon and Mallin (1997), by 1995, 98% of the companies followed the suggestions made by the Cadbury report and has reported the involvement of the remuneration committee in their annual reports. 3.2 The Greenbury Report (1995): Cadbury report failed to provide detailed guidance on how compensation packages have to be structured. However, it pointed out executive compensation to be the main area of study for the next committee known as the Greenbury Committee. The Greenbury Committee chaired by Sir Richard Greenbury, was formed by the United Kingdom Confederation of Business and Industry, and in 1995 it submitted the Greenbury report which dealt with matters regarding the determination and accounting of top executive pay. The main issues discussed in the Greenbury Report includes the role of the remuneration committee in an organisation, the disclosure requirement required by the shareholders of the organisation, the remuneration policies for compensating the executives and the service contracts provided to the executives. The remuneration policies recommended in the Greenbury Report are: a) Compensation packages must be provided by the remuneration committee to quality executives in order to influence, sec ure and encourage them and any payments extra to this intention must be avoided (Greenbury Report Paragraphs 6.5 – 6.7). b) The payments made and the subsequent resulting performance by other companies in the same industry must be evaluated by the remuneration committee. On the basis of this evaluation, the remuneration committee should relatively place their company (Paragraphs 6.11 – 6.12). c) While making changes to the annual salary of the executives, the remuneration committee should look into the payment and employment situations in other areas of the company rather than only concentrating on the executive pay and increasing them so as to satisfy the executives (Paragraph 6.13). d) The part of remuneration that is related to performance should be designed in such a way that the executives incentives go hand in hand with the interest of the shareholders and the executives are motivated to perform their duties with high standards (Paragraph 6.16). e) The performan ce conditions for executives to avail their annual bonuses, if any, should be designed to support and widen the operations of the business. The maximum possible amount of annual bonus an executive can avail should be taken into consideration by the remuneration committee and in some cases a part of these bonus payments can also be made by shares (Paragraphs 6.19 – 6.22). f) Under the long term incentive scheme, the Greenbury Report suggested that the shares and options granted to the executives should neither vest nor be exercisable, at least for a period of 3 years after such grant. The remuneration committee should encourage its executives to keep possession of their shares, after its vesting or exercise, for a long period of time (Paragraphs 6.23 – 6.34). g) The present existing long term incentive scheme should either be replaced by the new incentive scheme proposed or, the new incentive scheme proposed when combined with the old existing scheme should formulate a well structured incentive plan. The remuneration committee should make sure that the new long term incentive plan does not pay in excess than what is actually required for the executives and this new plan is accepted by the shareholders (Paragraph 6.35). h) The criteria for any long term incentive grant should be challenging and the performance of the executives should help achieve the goals set by the company in order to stand out from rest of its competitors. Key variables like the total shareholders return are used to judge the performance of the company with respect to its competitors (Paragraphs 6.38 – 6.40). i) Executive stock option grant or any other long term incentive grant must not be presented in lump-sum but should be awarded in series of stages. Moreover, no discount should be provided to the executives on the issue of executive stock option (Paragraph 6.29). j) While increasing the annual basic salary of the executives, the remuneration committee should look in to the effect of such increase on the executives pension entitlement and on the future expenses of the company particularly in case of those executives who are nearing retirement. The annual bonuses paid or any benefits paid in kind are not entitled for any pension payment (Paragraph 6.42 – 6.45). The aim of the Greenbury Report was not to cut down the executives remuneration but was to establish a balance between the compensation paid to the executives and their respective performance. On publishing the report in 1995 by the Greenbury Committee, certain tax advantages that was permitted on newly issued share options which comes under the approved executive share option scheme was withdrawn by the UK government. A new type of option scheme was introduced in November 1995 which had an upper limit of only  £20,000 on individual option holdings. Further, executive share options whose exercise price was earlier accepted at a discounted price of 15% on the existing share price at the time of grant was prevented (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walker, 2003). According to Conyon (1994) in UK, the top executive director of a company was also made member of its remuneration committee before the launch of the Greenbury Report. However, the old fashioned executive share options schemes was not benefitted from the recommendations made by the Greenbury Committee as it not only seized the tax benefits but also encouraged to substitute options with long term incentive plans which in the UK is just awarding shares and not cash. The recommendations made by the Greenbury Report were not widely accepted as many of the critics believed that the report failed to link the executive pay with the performance of the company. 3.3 The Combined Code (1998): The Combined Code of the London Stock Exchange controls the various remuneration practices adopted by the companies listed in the London Stock Exchange. It has combined the recommendations given by the Cadbury Report and the Greenbury Report in order to form a regulation for efficient remuneration practice. The annual report of the companies listed should contain in a separate section the remuneration policy adopted by the company. The Combined Code requires a statement, in the annual report, showing that the remuneration standards mentioned in the code are being followed by the company and if any set standard is not complied with, the statement should point out the reason for the non compliance. A high level of executive remuneration disclosure is also required under the combined code and clear explanations about the various compensation packages provided to each executive director and non executive director should be stated (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walk er, 2003). 4 Structure of Executive Remuneration in the UK: The typical structure of executive compensation in UK comprise of base salary, annual bonus, share options and long term incentive plans along with certain additional components like restricted stock and retirement plans. In 1997, an average executive compensation package consisted of 54% of base salary, 24% of annual bonus and 22% of non cash items which include share options and long term incentive plans (Martin J. Conyon, Simon I. Peck, Laura E. Read and Graham V. Sadler, 2000). Base Salary Determination of the base salary of an executive is done by taking into consideration the base salaries paid to executives of other companies in the same industry through surveys and analysis. This system of setting up and providing base salary is known as competitive benchmarking. Certain modifications are carried out on the base salary depending on the size of the firm, thereby linking executive compensation and firm size. In UK, base salary form the major part of the total executive remuneration paid. Base salary is that component of executive remuneration which is fixed and do not vary according to the performance, experience, age, etc of the executives. A  £1 increase in the base salary is preferred by executives who are risk averse than a  £1 increase in other components of executive compensation that are variable. Annual Bonus Bonus is provided to the executives on the basis of their performance during the relevant financial year. It is provided on an annual basis and the amounts paid as bonus to each executive vary from year to year. The performance of the executives is generally measured by taking into consideration accounting numbers which can be cross checked and audited. Executives have a clear idea of their daily performance by looking at the accounting numbers and they can forecast how overall profit of the company is going to look like at the end of the year. The drawback of relying on accounting numbers for measuring performance is that it is fully under the control of the executives and if wanted executives can manipulate the accounts in order to increase their annual bonus entitlement. Share Options Share options are contracts provided to the executives that cannot be traded which gives the executives the right to buy the shares of the firm at a price that is pre-determined known as the exercisable price for a specified time period. These contracts become void and have to be surrendered if the exercisable period mentioned has elapsed or if the executive resigns from the company before the exercisable period. This component of executive compensation is looked more into detail in the later section. Long-Term Incentive Plans – Long-Term Incentive Plans are provided to the executives in order to motivate and compensate them for achieving long term performance for the company. Grant of shares is the most typical form of LTIPs provided in the UK. These shares are vested to the executives only on achieving the objectives set by the company that is related to future performance. Earnings per Share and Total Shareholders Return are the two main elements by which the performance of the company is measured in the UK. Retirement Plans – Apart from the basic pension plans provided by the company, in UK, executives are encouraged to participate in an additional retirement benefit plan. These plans are a major source of concern because it symbolises invisible compensation. The actual value of executive retirement plan cannot be calculated by the available information provided in the books of accounts and the annual report. 4.1 Disclosure Requirement of Executives Remuneration in the UK: The Greenbury Report in 1995 identified three fundamental principles, which are accountability, transparency and performance linkage, in respect to executives remuneration. In UK, the current best practice disclosure pattern failed to compile with these fundamental principles therefore the government introduced certain necessary additions to the existing disclosure pattern. These latest requirements regarding disclosure of UK executives remuneration unifies the existing law, regulation and best practices that are mentioned in the UK Companies Act of 1985, the UK Listing Rules and the UK Combined Code of Principles of Good Governance and Code of Best Practice. The new requirement requires every company in the UK to adopt and prepare the directors remuneration report along with other necessary requirements. 4.1.1 Directors Remuneration Report (DRR): Companies listed in the London Stock Exchange should prepare the directors remuneration report for every financial year (Section 234B Companies Act) and should publish this report along with the accounts and annual report of the company (Section 244 Companies Act). The preparation of the remuneration report is done by the board of directors and not by the remuneration committee being, a committee accountable and responsible to the board and consisting only the non executive directors of the company. The remuneration of both the executive and non executive directors is clearly mentioned in the remuneration report. The fully prepared remuneration report should be filed with the registrar of companies (Section 242 Companies Act) and made available and provided to all the parties interested in the company such as the shareholders, debenture holders, and other persons who are required to attend the general meetings (Section 238 Companies Act). The remuneration report should contain all the information regarding the remuneration of the directors for the financial year completed i.e. the relevant financial year which includes disclosure of the amount receivable by the directors, whether paid or not, during the financial year as well as the disclosure of any amount paid as directors remuneration for any other period during the financial year (Companies Act, Schedule 7A, paragraph 19). The remuneration report should include the payments made to a third party for any services provided to the directors (Companies Act, Schedule 7A, paragraph 18(3)) and a statement showing the future remuneration policy of the directors. In UK, only the disclosure of directors remuneration is needed in the remuneration report. The name and information of every person who is the director, during the relevant financial year, has to be mentioned in the remuneration report. The remuneration report contains information that has to be audited by an external auditor (Companies Act, Schedule 7A, Part 3) and information need not be audited (Companies Act, Schedule 7A, Part 3). a) Information in DRR subject to audit: With regards to information subject to audit, the external auditor in his own consent should mention whether the information provided are prepared according to the necessary requirement and if any information is not complied as needed, the auditor should provide a statement showing them (Sections 235 and 237 Companies Act). The auditor will also look into disclosure information that are not subjected to audit and verify them with the company accounts as well as with the disclosure information that are audited. The various information included in the DRR that are subject to audit are: Emoluments and compensation For the services provided to the company as an executive or for any other services relating to the companys management, the salary, bonus, fees or compensation as termination of qualifying services received or receivable by the executives should be disclosed in the DRR. The overall value of non monetary benefits provided to the executives should be mentioned and the total aggregate of each kind of executive compensation provided in the relevant financial year should be compared with the previous financial year (Companies Act, Schedule 7A, paragraph 6). Share Options – The different types of shares options a company have should be mentioned along with their terms and conditions and besides each share option the total option each executive hold in the beginning of the relevant financial year as well as in the end should be disclosed. Detailed information of the various options provided during the year, its date of grant, its exercise price, date of expiry, number that have become void and number exercised and unexercised by the executives should be mentioned. If the share options are subject to any performance condition then the criteria has to be clearly described. For those shares that have been exercised, the market price during the time of exercise and for those shares unexercised ,the highest, lowest and the year end market prices have to be also mentioned. Since the disclosure of share options is a lengthy process, the aggregate of options each director hold is stated and the disclosure can be made on the basis of weighted average exercise pri ces (Companies Act, Schedule 7A, paragraphs 7-9). Long-term incentive schemes – Disclosure of scheme interests at the beginning and end of the current financial year which each executive hold must be made. Details of the type of scheme interest provided to the executives, its value and when it is vested in the year should be mentioned. If there are any conditions on the basis of which scheme interests will be granted then the relevant conditions should be specified (Companies Act, Schedule 7A, paragraphs 10 and 11). Other Information Details of executives pension scheme transfer value, any benefits that are accumulated over time and amount paid or payable by the company towards the money purchase pension scheme and retirement benefit scheme should be mentioned (Companies Act, Schedule 7A, paragraph 12). Amount received or receivable by the executives as benefits over and above the retirement benefit which he is entitled after 31st March 1997 should be included in the DRR (Companies Act, Schedule 7A, paragraph 13). If any person, who was once the executive of the company, has been given a special reward or if any third party is paid for their services provided to the executives during the relevant financial year it should be stated and disclosed (Companies Act, Schedule 7A, paragraph 14 15). b) Information in DRR not subject to audit: The information in the DRR that are not subject to audit is: Remuneration Committee – If any decision regarding the remuneration of the executives is taken by a committee during the financial year then the DRR must contain the name of all the non executive directors who were the members of such a committee and also should mention the name of any other person who is not the member of the committee but has been appointed by the members to assist them with certain services and advice. The details of the services rendered by the outside party should be clearly mentioned and this is done to ensure that the executive director play no role and influence the decision making of the committee (Companies Act, Schedule 7A, paragraph 2). Statement of policy on executives remuneration – A statement of future policy on executives remuneration for the coming financial years has to be included in the directors remuneration report (Companies Act, Schedule 7A, paragraph 3). The statement of policy should therefore disclose the conditions of performance, by an executive, for the entitlement of share option and long term incentive scheme along with the reasons for setting up such performance condition and the method used to assess the performance condition. If any executive fails meet the performance condition and does not benefit from the stock option grant or long term incentive scheme, the report should clearly state the conditions that are unsatisfactory. Details of the company on the basis of which the performance is measured should be provided in the report. Changes or amendments proposed to the existing terms and conditions for executives entitlement should be highlighted. Explanation should also provide for non-performance related remuneration and company policies on executives service contracts. This statement covers all directors from the end of the current financial year till the time when the report is put for voting by the shareholders of the company Performance graph – Publication of preceding 5 years performance graph should be included in the DRR showing the total shareholder return for holding shares whose listing transformed the company into a quoted company and for holding shares on the basis of which calculations are made for a broad equity market index. A fair method is used for the calculation of the total shareholder return along with various assumptions like the interest received on shares being reinvested (Companies Act, Schedule 7A, paragraph 4). Service Contract – During the relevant financial year if any executive is provided with a service contract, the date at which the service contract has been provided, its duration and its terms and conditions should be mentioned in the remuneration report. A detail of the termination compensation the executive is entitled to receive along with the companys liability on early termination is to be included (Companies Act, Schedule 7A, paragraph 5). On the complete preparation of the remuneration report, in the annual general body meeting it is introduced and called for a vote by the shareholders of the company (Section 241A Companies Act). This concept of voting the remuneration report was a controversial topic as many commentators suggested the voting to be limited to only the remuneration policy rather than the whole remuneration report. The reason they point out is that the executives remuneration policies are futuristic in nature so the shareholders can express their opinion on the policies adopted ra ther than making aware of the actual remuneration paid to each individual director. 4.1.2 Other Requirements: a) Along with the preparation of the DRR, disclosure of the aggregate compensation of the executive, loan given to the executives and other company transactions with the executive should be done in the notes of the annual accounts as mentioned in Schedule 6 of the Companies Act. b) As per Section 251 of the Companies Act and Companies Regulations (1995), listed companies in their summary financial statements should as a statement, state its policies regarding the remuneration of executives and the companys performance graph. 5 Stock/Share Options – Are they the Best in an Executive Compensation package? The most prominent and important component of executive compensation, in order to merge the interests of the executives with that of the interests of the shareholders, is providing the executives with stock options in the firms they serve (Jensen and Meckling, 1976). According to Jeffrey A. Williamson and Brian H. Kleiner, A stock option is a security that represents the right, but not the obligation, to buy or sell a specified amount of stocks at a specified price within a specified period of time. Stock options granted to executives of many large multinational firms are much higher in value than the annual cash pay they are entitled to be paid which in-turn boosts up the overall total compensation provided to the executives. This makes stock options the single largest ingredient in the current scenario of executive compensation. In the United States itself, stock options are held by more than 10 million employees (Simon R. and Dugan J., 2001) out of which around 160,000 of them tur ned out to be millionaires (Tate E.A. and Wilson T.E., 2001). Initially stock options were provided as a bonus to all the key executives of a company, but during the recent years its use is restricted only to the top level management. Providing stock options have resulted in increased productivity of the organisations. Executives are aware that their gain is linked with the stock performance of the organisation therefore they strive harder and work more efficiently to achieve progress. The main objective behind granting stock options is to make sure that executive make a profit on the success of the companys operations and in case of failures they suffer. Hence executive stock options link pay to performance. Critics argue to provide shares of stock rather than providing stock options in order to link pay and performance. The value of a stock option is only one third the value of a share, in case of companies having an average volatile stock price and yielding an average dividend the reason being stockholders receiving the whole value along with the dividend payment and the option holders benefitting only from the additional returns that is over and above the exercise price. This implies that options have a greater leverage and at the same cost, a company can provide its executives with options that are three times as much as that of shares. Stock options are incentive plans that are future Executive Compensation and Stock Option in the UK Executive Compensation and Stock Option in the UK 1 Introduction Todays highly competitive world consists of numerous corporations and these corporations are so huge and so large that it cannot be controlled by the people who own them. The control of these corporations is separated from shareholders who are the owners and vested into the hands of professional executives who are specifically hired for its management. This separation of ownership and control gave rise to agency problem or the principal-agent problem. Principal is referred to the stockholders and the agents are the executives who work for the stockholders. Although stockholders are the owners of the company to whom the executives are accountable, their actual powers are restricted except in the case of those corporations where stockholders are also the directors of that corporation. Stockholders have no right to inspect the books of accounts nor are they aware of the exact functioning and position of the firm. As a result, executives tend to work inefficiently without even bothering to look for profitable new investment opportunities, as well as they may use the firms assets for private purposes and also work to achieve their personal goals all at the expense of the shareholders. Some managers do not take any action whatever state or condition the corporation may be as they are risk averse and fear the threat of losing their job if a decision taken by them goes wrong. Therefore in order to avoid the various problems that arise due to the agency problem, executives must be properly and promptly compensated along with proper monitoring. In the beginning of 1990s, debates on corporate governance mainly focused on directors remuneration and fat cats. Fat cats are referred to those executives who provided themselves with huge compensation packages without any performance criteria. In UK, the most famous Fat Cat episode which saddened the shareholders of many large public companies and dragged the attention of the media was the notorious British Gas incident of the mid 1990s. Various issues arising out of executive compensation and the trouble of framing the deserved level of compensation, that has to be provided to an executive, made executive remuneration a main area of concern under corporate governance. According to Jensen (1993), providing the right level of remuneration to the executives and creating positive incentives in order to achieve the interest of the shareholders has been an important study conducted in many academic literatures. An improvement in corporate governance is brought about by filtering certain aspects of executive remuneration. There exists a wide gap between the remuneration paid to the executives and the remuneration paid to the other employees on the company. This gap keeps on increasing year after year as executives demand more and more for their services and decision making process to boosts the productivity and reputation of the firm which thereby increases the market price of the companys share. In a research mentioned in the Higgs Report (2003), chairmen of FTSE 100 companies in 2003 earned an average of  £ 426,000 as remuneration. Moreover, executives are being rewarded with stock options which would enrich them with abnormal profits in the future when the options granted to them are exercised. Critics argue that, executives are not worth for the remuneration paid because of their poor and unsatisfactory performance. According to Blitz (2003), MORI a leading market research company in the UK, through a survey, found 78% of the people unsatisfied by the remuneration paid to the executives. The pu blic in UK believe that executives are being overpaid for the amount of work they actually do. 2 Methodology This paper is a critical review on the various aspects of executive compensation in the UK and how the executive compensation especially the executive stock option encourage the managers and top executives, for their personal benefit, to take short term high risks and boost up the current value of shares rather than looking into the future and acting in favour of the stakeholders of the company. The tools used for the research mainly consist of various literature reviews of past articles and current working papers with some analysis of some statistical data regarding executive compensation. On the basis of the above mentioned area of research certain questions have been framed which will be critically looked into: a) Brief description of the executive compensation and corporate governance in the UK. b) Basic structure of executive remuneration in the UK and their disclosure requirements in United Kingdom. c) Are stock options considered the best means of remuneration in an executive compensation package? d) A brief historical overview of the introduction of executive stock option in the UK. e) What are the various manipulations done with executive stock option and what are the risk incentives created by executive stock option? f) Brief comparison of the UK executive compensation with the US executive compensation. g) The role of executive compensation in the UK banking towards the current financial crises. 3 Executive Compensation and Corporate Governance in the United Kingdom: During the past decade, various issues on corporate governance established the emergence of many reports and codes of best practice in the United Kingdom. These include the Inland Revenue (1988), Cadbury Report (1992), Greenbury Report (1995), Hampel Report (1998), The Combined Code (1998), Hermes Statement on Corporate Governance and Voting Policy (1998), Internal Control: Guidance for Directors on the Combined Code (Turnbull Report)(1999), Company Law Reform (1999) and Financial Services Market Act (2001) (Konstantinos Stathopoulos, Susanne Espenlaub, Martin Walker, 2003). Among these reports the Cadbury Report, Greenbury Report and the Combined Code, which emerged from the Hampel Report, focused on issues regarding executive compensation. 3.1 Cadbury Report (1992): The first guidelines of good practice on various issues of corporate governance were provided in the year 1992 by the Cadbury Committee which was established in May 1991 and was chaired by Adrian Cadbury. The Cadbury Committee discussed issues that were broader in nature than the executive remuneration but certain suggestions the committee made on altering the executive pay was accepted as permanent. The Cadbury report was titled as the Financial Aspects of Corporate Governance and came out with the Code of Best Practice, which insisted that decisions based on executive remunerations should not be made by the executive directors nor they have to get involved in making such a decision (1992, paragraph 4.42 p. 31). The report therefore recommended the appointment of a remuneration committee which will act in the interest of the shareholders of the firm and express a good opinion on various matters regarding executive compensation to the board. Companies in the UK responded spontaneousl y to this recommendation made in the Cadbury Report and established a remuneration committee within the firm (Bostock, 1995). The remuneration committee consists of a non-executive director as the chairperson and non-executive directors as its members who are all independent and free from the influence of the management. According to Williamson (I985), there always arises a question of doubt whether the directors make remuneration contracts for their own huge benefits and sanction it, if an independent pay committee does not exist. The role of remuneration committee is to ensure that executive compensation levels are set up in a formal, transparent way along with the goals required to be achieved by the executives for any schemes that are performance related. The remuneration committee can take advice from outside sources whenever necessary. The Cadbury report also suggested the establishment of an audit committee within each company which comprises of three non-executive directors (Martin Conyon, Paul Gregg and Stephen Machin, 1995). According to a questionnaire survey conducted by Conyon and Mallin (1997), by 1995, 98% of the companies followed the suggestions made by the Cadbury report and has reported the involvement of the remuneration committee in their annual reports. 3.2 The Greenbury Report (1995): Cadbury report failed to provide detailed guidance on how compensation packages have to be structured. However, it pointed out executive compensation to be the main area of study for the next committee known as the Greenbury Committee. The Greenbury Committee chaired by Sir Richard Greenbury, was formed by the United Kingdom Confederation of Business and Industry, and in 1995 it submitted the Greenbury report which dealt with matters regarding the determination and accounting of top executive pay. The main issues discussed in the Greenbury Report includes the role of the remuneration committee in an organisation, the disclosure requirement required by the shareholders of the organisation, the remuneration policies for compensating the executives and the service contracts provided to the executives. The remuneration policies recommended in the Greenbury Report are: a) Compensation packages must be provided by the remuneration committee to quality executives in order to influence, sec ure and encourage them and any payments extra to this intention must be avoided (Greenbury Report Paragraphs 6.5 – 6.7). b) The payments made and the subsequent resulting performance by other companies in the same industry must be evaluated by the remuneration committee. On the basis of this evaluation, the remuneration committee should relatively place their company (Paragraphs 6.11 – 6.12). c) While making changes to the annual salary of the executives, the remuneration committee should look into the payment and employment situations in other areas of the company rather than only concentrating on the executive pay and increasing them so as to satisfy the executives (Paragraph 6.13). d) The part of remuneration that is related to performance should be designed in such a way that the executives incentives go hand in hand with the interest of the shareholders and the executives are motivated to perform their duties with high standards (Paragraph 6.16). e) The performan ce conditions for executives to avail their annual bonuses, if any, should be designed to support and widen the operations of the business. The maximum possible amount of annual bonus an executive can avail should be taken into consideration by the remuneration committee and in some cases a part of these bonus payments can also be made by shares (Paragraphs 6.19 – 6.22). f) Under the long term incentive scheme, the Greenbury Report suggested that the shares and options granted to the executives should neither vest nor be exercisable, at least for a period of 3 years after such grant. The remuneration committee should encourage its executives to keep possession of their shares, after its vesting or exercise, for a long period of time (Paragraphs 6.23 – 6.34). g) The present existing long term incentive scheme should either be replaced by the new incentive scheme proposed or, the new incentive scheme proposed when combined with the old existing scheme should formulate a well structured incentive plan. The remuneration committee should make sure that the new long term incentive plan does not pay in excess than what is actually required for the executives and this new plan is accepted by the shareholders (Paragraph 6.35). h) The criteria for any long term incentive grant should be challenging and the performance of the executives should help achieve the goals set by the company in order to stand out from rest of its competitors. Key variables like the total shareholders return are used to judge the performance of the company with respect to its competitors (Paragraphs 6.38 – 6.40). i) Executive stock option grant or any other long term incentive grant must not be presented in lump-sum but should be awarded in series of stages. Moreover, no discount should be provided to the executives on the issue of executive stock option (Paragraph 6.29). j) While increasing the annual basic salary of the executives, the remuneration committee should look in to the effect of such increase on the executives pension entitlement and on the future expenses of the company particularly in case of those executives who are nearing retirement. The annual bonuses paid or any benefits paid in kind are not entitled for any pension payment (Paragraph 6.42 – 6.45). The aim of the Greenbury Report was not to cut down the executives remuneration but was to establish a balance between the compensation paid to the executives and their respective performance. On publishing the report in 1995 by the Greenbury Committee, certain tax advantages that was permitted on newly issued share options which comes under the approved executive share option scheme was withdrawn by the UK government. A new type of option scheme was introduced in November 1995 which had an upper limit of only  £20,000 on individual option holdings. Further, executive share options whose exercise price was earlier accepted at a discounted price of 15% on the existing share price at the time of grant was prevented (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walker, 2003). According to Conyon (1994) in UK, the top executive director of a company was also made member of its remuneration committee before the launch of the Greenbury Report. However, the old fashioned executive share options schemes was not benefitted from the recommendations made by the Greenbury Committee as it not only seized the tax benefits but also encouraged to substitute options with long term incentive plans which in the UK is just awarding shares and not cash. The recommendations made by the Greenbury Report were not widely accepted as many of the critics believed that the report failed to link the executive pay with the performance of the company. 3.3 The Combined Code (1998): The Combined Code of the London Stock Exchange controls the various remuneration practices adopted by the companies listed in the London Stock Exchange. It has combined the recommendations given by the Cadbury Report and the Greenbury Report in order to form a regulation for efficient remuneration practice. The annual report of the companies listed should contain in a separate section the remuneration policy adopted by the company. The Combined Code requires a statement, in the annual report, showing that the remuneration standards mentioned in the code are being followed by the company and if any set standard is not complied with, the statement should point out the reason for the non compliance. A high level of executive remuneration disclosure is also required under the combined code and clear explanations about the various compensation packages provided to each executive director and non executive director should be stated (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walk er, 2003). 4 Structure of Executive Remuneration in the UK: The typical structure of executive compensation in UK comprise of base salary, annual bonus, share options and long term incentive plans along with certain additional components like restricted stock and retirement plans. In 1997, an average executive compensation package consisted of 54% of base salary, 24% of annual bonus and 22% of non cash items which include share options and long term incentive plans (Martin J. Conyon, Simon I. Peck, Laura E. Read and Graham V. Sadler, 2000). Base Salary Determination of the base salary of an executive is done by taking into consideration the base salaries paid to executives of other companies in the same industry through surveys and analysis. This system of setting up and providing base salary is known as competitive benchmarking. Certain modifications are carried out on the base salary depending on the size of the firm, thereby linking executive compensation and firm size. In UK, base salary form the major part of the total executive remuneration paid. Base salary is that component of executive remuneration which is fixed and do not vary according to the performance, experience, age, etc of the executives. A  £1 increase in the base salary is preferred by executives who are risk averse than a  £1 increase in other components of executive compensation that are variable. Annual Bonus Bonus is provided to the executives on the basis of their performance during the relevant financial year. It is provided on an annual basis and the amounts paid as bonus to each executive vary from year to year. The performance of the executives is generally measured by taking into consideration accounting numbers which can be cross checked and audited. Executives have a clear idea of their daily performance by looking at the accounting numbers and they can forecast how overall profit of the company is going to look like at the end of the year. The drawback of relying on accounting numbers for measuring performance is that it is fully under the control of the executives and if wanted executives can manipulate the accounts in order to increase their annual bonus entitlement. Share Options Share options are contracts provided to the executives that cannot be traded which gives the executives the right to buy the shares of the firm at a price that is pre-determined known as the exercisable price for a specified time period. These contracts become void and have to be surrendered if the exercisable period mentioned has elapsed or if the executive resigns from the company before the exercisable period. This component of executive compensation is looked more into detail in the later section. Long-Term Incentive Plans – Long-Term Incentive Plans are provided to the executives in order to motivate and compensate them for achieving long term performance for the company. Grant of shares is the most typical form of LTIPs provided in the UK. These shares are vested to the executives only on achieving the objectives set by the company that is related to future performance. Earnings per Share and Total Shareholders Return are the two main elements by which the performance of the company is measured in the UK. Retirement Plans – Apart from the basic pension plans provided by the company, in UK, executives are encouraged to participate in an additional retirement benefit plan. These plans are a major source of concern because it symbolises invisible compensation. The actual value of executive retirement plan cannot be calculated by the available information provided in the books of accounts and the annual report. 4.1 Disclosure Requirement of Executives Remuneration in the UK: The Greenbury Report in 1995 identified three fundamental principles, which are accountability, transparency and performance linkage, in respect to executives remuneration. In UK, the current best practice disclosure pattern failed to compile with these fundamental principles therefore the government introduced certain necessary additions to the existing disclosure pattern. These latest requirements regarding disclosure of UK executives remuneration unifies the existing law, regulation and best practices that are mentioned in the UK Companies Act of 1985, the UK Listing Rules and the UK Combined Code of Principles of Good Governance and Code of Best Practice. The new requirement requires every company in the UK to adopt and prepare the directors remuneration report along with other necessary requirements. 4.1.1 Directors Remuneration Report (DRR): Companies listed in the London Stock Exchange should prepare the directors remuneration report for every financial year (Section 234B Companies Act) and should publish this report along with the accounts and annual report of the company (Section 244 Companies Act). The preparation of the remuneration report is done by the board of directors and not by the remuneration committee being, a committee accountable and responsible to the board and consisting only the non executive directors of the company. The remuneration of both the executive and non executive directors is clearly mentioned in the remuneration report. The fully prepared remuneration report should be filed with the registrar of companies (Section 242 Companies Act) and made available and provided to all the parties interested in the company such as the shareholders, debenture holders, and other persons who are required to attend the general meetings (Section 238 Companies Act). The remuneration report should contain all the information regarding the remuneration of the directors for the financial year completed i.e. the relevant financial year which includes disclosure of the amount receivable by the directors, whether paid or not, during the financial year as well as the disclosure of any amount paid as directors remuneration for any other period during the financial year (Companies Act, Schedule 7A, paragraph 19). The remuneration report should include the payments made to a third party for any services provided to the directors (Companies Act, Schedule 7A, paragraph 18(3)) and a statement showing the future remuneration policy of the directors. In UK, only the disclosure of directors remuneration is needed in the remuneration report. The name and information of every person who is the director, during the relevant financial year, has to be mentioned in the remuneration report. The remuneration report contains information that has to be audited by an external auditor (Companies Act, Schedule 7A, Part 3) and information need not be audited (Companies Act, Schedule 7A, Part 3). a) Information in DRR subject to audit: With regards to information subject to audit, the external auditor in his own consent should mention whether the information provided are prepared according to the necessary requirement and if any information is not complied as needed, the auditor should provide a statement showing them (Sections 235 and 237 Companies Act). The auditor will also look into disclosure information that are not subjected to audit and verify them with the company accounts as well as with the disclosure information that are audited. The various information included in the DRR that are subject to audit are: Emoluments and compensation For the services provided to the company as an executive or for any other services relating to the companys management, the salary, bonus, fees or compensation as termination of qualifying services received or receivable by the executives should be disclosed in the DRR. The overall value of non monetary benefits provided to the executives should be mentioned and the total aggregate of each kind of executive compensation provided in the relevant financial year should be compared with the previous financial year (Companies Act, Schedule 7A, paragraph 6). Share Options – The different types of shares options a company have should be mentioned along with their terms and conditions and besides each share option the total option each executive hold in the beginning of the relevant financial year as well as in the end should be disclosed. Detailed information of the various options provided during the year, its date of grant, its exercise price, date of expiry, number that have become void and number exercised and unexercised by the executives should be mentioned. If the share options are subject to any performance condition then the criteria has to be clearly described. For those shares that have been exercised, the market price during the time of exercise and for those shares unexercised ,the highest, lowest and the year end market prices have to be also mentioned. Since the disclosure of share options is a lengthy process, the aggregate of options each director hold is stated and the disclosure can be made on the basis of weighted average exercise pri ces (Companies Act, Schedule 7A, paragraphs 7-9). Long-term incentive schemes – Disclosure of scheme interests at the beginning and end of the current financial year which each executive hold must be made. Details of the type of scheme interest provided to the executives, its value and when it is vested in the year should be mentioned. If there are any conditions on the basis of which scheme interests will be granted then the relevant conditions should be specified (Companies Act, Schedule 7A, paragraphs 10 and 11). Other Information Details of executives pension scheme transfer value, any benefits that are accumulated over time and amount paid or payable by the company towards the money purchase pension scheme and retirement benefit scheme should be mentioned (Companies Act, Schedule 7A, paragraph 12). Amount received or receivable by the executives as benefits over and above the retirement benefit which he is entitled after 31st March 1997 should be included in the DRR (Companies Act, Schedule 7A, paragraph 13). If any person, who was once the executive of the company, has been given a special reward or if any third party is paid for their services provided to the executives during the relevant financial year it should be stated and disclosed (Companies Act, Schedule 7A, paragraph 14 15). b) Information in DRR not subject to audit: The information in the DRR that are not subject to audit is: Remuneration Committee – If any decision regarding the remuneration of the executives is taken by a committee during the financial year then the DRR must contain the name of all the non executive directors who were the members of such a committee and also should mention the name of any other person who is not the member of the committee but has been appointed by the members to assist them with certain services and advice. The details of the services rendered by the outside party should be clearly mentioned and this is done to ensure that the executive director play no role and influence the decision making of the committee (Companies Act, Schedule 7A, paragraph 2). Statement of policy on executives remuneration – A statement of future policy on executives remuneration for the coming financial years has to be included in the directors remuneration report (Companies Act, Schedule 7A, paragraph 3). The statement of policy should therefore disclose the conditions of performance, by an executive, for the entitlement of share option and long term incentive scheme along with the reasons for setting up such performance condition and the method used to assess the performance condition. If any executive fails meet the performance condition and does not benefit from the stock option grant or long term incentive scheme, the report should clearly state the conditions that are unsatisfactory. Details of the company on the basis of which the performance is measured should be provided in the report. Changes or amendments proposed to the existing terms and conditions for executives entitlement should be highlighted. Explanation should also provide for non-performance related remuneration and company policies on executives service contracts. This statement covers all directors from the end of the current financial year till the time when the report is put for voting by the shareholders of the company Performance graph – Publication of preceding 5 years performance graph should be included in the DRR showing the total shareholder return for holding shares whose listing transformed the company into a quoted company and for holding shares on the basis of which calculations are made for a broad equity market index. A fair method is used for the calculation of the total shareholder return along with various assumptions like the interest received on shares being reinvested (Companies Act, Schedule 7A, paragraph 4). Service Contract – During the relevant financial year if any executive is provided with a service contract, the date at which the service contract has been provided, its duration and its terms and conditions should be mentioned in the remuneration report. A detail of the termination compensation the executive is entitled to receive along with the companys liability on early termination is to be included (Companies Act, Schedule 7A, paragraph 5). On the complete preparation of the remuneration report, in the annual general body meeting it is introduced and called for a vote by the shareholders of the company (Section 241A Companies Act). This concept of voting the remuneration report was a controversial topic as many commentators suggested the voting to be limited to only the remuneration policy rather than the whole remuneration report. The reason they point out is that the executives remuneration policies are futuristic in nature so the shareholders can express their opinion on the policies adopted ra ther than making aware of the actual remuneration paid to each individual director. 4.1.2 Other Requirements: a) Along with the preparation of the DRR, disclosure of the aggregate compensation of the executive, loan given to the executives and other company transactions with the executive should be done in the notes of the annual accounts as mentioned in Schedule 6 of the Companies Act. b) As per Section 251 of the Companies Act and Companies Regulations (1995), listed companies in their summary financial statements should as a statement, state its policies regarding the remuneration of executives and the companys performance graph. 5 Stock/Share Options – Are they the Best in an Executive Compensation package? The most prominent and important component of executive compensation, in order to merge the interests of the executives with that of the interests of the shareholders, is providing the executives with stock options in the firms they serve (Jensen and Meckling, 1976). According to Jeffrey A. Williamson and Brian H. Kleiner, A stock option is a security that represents the right, but not the obligation, to buy or sell a specified amount of stocks at a specified price within a specified period of time. Stock options granted to executives of many large multinational firms are much higher in value than the annual cash pay they are entitled to be paid which in-turn boosts up the overall total compensation provided to the executives. This makes stock options the single largest ingredient in the current scenario of executive compensation. In the United States itself, stock options are held by more than 10 million employees (Simon R. and Dugan J., 2001) out of which around 160,000 of them tur ned out to be millionaires (Tate E.A. and Wilson T.E., 2001). Initially stock options were provided as a bonus to all the key executives of a company, but during the recent years its use is restricted only to the top level management. Providing stock options have resulted in increased productivity of the organisations. Executives are aware that their gain is linked with the stock performance of the organisation therefore they strive harder and work more efficiently to achieve progress. The main objective behind granting stock options is to make sure that executive make a profit on the success of the companys operations and in case of failures they suffer. Hence executive stock options link pay to performance. Critics argue to provide shares of stock rather than providing stock options in order to link pay and performance. The value of a stock option is only one third the value of a share, in case of companies having an average volatile stock price and yielding an average dividend the reason being stockholders receiving the whole value along with the dividend payment and the option holders benefitting only from the additional returns that is over and above the exercise price. This implies that options have a greater leverage and at the same cost, a company can provide its executives with options that are three times as much as that of shares. Stock options are incentive plans that are future

Instant Messenger Programs Essay -- Communication Computers Internet E

Analysis of Instant Messenger Programs From telegrams to telephones, to emails and faxes, people have had a strong desire to be connected to one another. The onset of the information age has only increased that desire - to the point that people are seeking a constant connection. The introduction of instant messenger programs has allowed people to be connected and communicate in real-time. Instant messaging not only provides transfer of text messages, but peer-to-peer file sharing as well. While file transfer provides the user with increased convenience, it also increases the odds of transferring viruses, worms, and other malware. This paper will discuss the major instant messenger programs: AOL IM, .NET Messenger, ICQ, and Yahoo! Messenger. In particular it will explore the threats and security risks involved in both personal and professional use of instant messenger programs. Introduction As the name suggests, instant messaging, or IM, is the real-time delivery of a message from one user to another. Communication between any computing stations can occur as long as the appropriate version of the program is installed. Users must also be concurrently running an IM client (program) as well as be on the same IM network [7]. A conversation that occurs between two or more users is known as a session (or channel). A session can either be public, where any and all users can participate, or private, where users must be invited to participate in the session. Buddy lists, also known as contact lists, allow users to maintain communication with specific users of the same IM client and network. While each instant messaging program is unique, they all employ similar client-server architecture to send and receive m... ... [5] Gaudin, Sharon. â€Å"Norton Antivirus Attacks Instant Messaging.† www.instant-messaging.com. August 2002. [6] Grimes, Roger A. "IM Security Primer." www.secadministrator.com. May 2002. [7] Hindocha, Neal. â€Å"Instant Insecurity: Security Issues of Instant Messaging.† www.securityfocus.com. January 2003. [8] Hindocha, Neal. â€Å"Threats to Instant Messaging.† Symantec Security Response. January 2003. [9] Hu, Jim. â€Å"Worms Find Fertile Ground in IM.† www.cnetnews.com. August 2001. [10] Shinder, Thomas. â€Å"How to Block Dangerous Instant Messengers Using ISA Server.† www.windowssecurity.com. July 2002. [11] Thorsberg, Frank. â€Å"Is IM a Sieve for Corporate Secrets?† www.pcworld.com July 2002. [12] Varnosi, Robert. â€Å"The Problem with Instant Messaging Apps at Work.† www.cnet.com. August 2002