Issues Related to a Reasonableness of Executive Compensation Analysis

Abstract

In most companies, there is ongoing conflict between managers in charge of covering costs (finance and accounting) and managers in charge of satisfying customers (marketing and sales). Accounting journals warn against prices that fail to cover full costs, while marketing journals argue that customer willingness-to-pay must be the sole driver of prices. This article will further explain these reasons to conduct an independent reasonableness of executive/professional practitioner compensation analysis. In addition, this article will discuss many of the typical factors that the independent analyst will consider in assessing the reasonableness of executive compensation for controversy, taxation, corporate planning, and corporate governance purposes.