Business And Organizational Assignment

Question 1

Proxy advisory services, such as Institutional Shareholder Services (ISS) and Glass Lewis, assist organizations in voting their shares at annual meetings, and both have created models for effective governance. However, as you have learned, how these advisory firms develop their voting recommendations can negatively affect an organization's overall governance and how it designs its executive compensation contracts.

Instructions:

For each of your responses, explain your reasoning and provide examples from your organization, experience, or research.

Respond to one of the prompts from the list below in the discussion:

• Why is it often easier for organizations to outsource proxy voting recommendations instead of doing it in-house?
• How do proxy advisory firms, such as ISS and Glass Lewis, develop their voting recommendations? What are the consequences of these recommendations when designing effective executive compensation plans?
• Explain how reliance on proxy advisory firms resulted in an increased focus on compliance.
• Based on proxy advisory firm recommendations, provide at least one example of an executive compensation plan change.

Required words: 500 words

Question 2

What is the impact of shareholder voting on executive compensation? Does shareholder voting lead to better pay? Does it lead to better board accountability? Professor Armstrong examines these questions in Video 5.3: Shareholder Voting.

Instructions:

Consider these questions as they relate to executive compensation, and respond to one of the following on the discussion board:

• “Say-on-pay” rules Links to an external site. implemented as part of the Dodd–Frank Act (2010) were designed to rein in excessive levels of executive compensation. How successful are they?
• Do you think “say-on-pay” effectively incentivizes organizations to disclose information related to their executive compensation plans?
• How does a negative recommendation by a proxy advisory organization influence how shareholders vote?
• Why is it important for the board to know how proxy advisory firms and shareholders view the structure of executive compensation plans?
• How do proxy advisory firms and shareholders gauge whether an executive’s compensation level is appropriate?

Source: "SEC Adopts Rules for Say-on-Pay and Golden Parachute Compensation as Required Under Dodd-Frank Act." U.S. Securities and Exchange Commission, January 25, 2011. https://www.sec.gov/news/press/2011/2011-25.htm

Words required: 500 words

Question 3

The traditional media and business press control the dissemination of information to the public. However, the public now can share information and opinions through social media platforms. Traditional and social media both offer forums for criticism of organizations and the actions of their senior executives.

Instructions:

Below are two activity options; select one and post the example and your response to the prompts in the discussion forum.

1. Find an example of a traditional or social media campaign that influenced the actions of an organization or senior executive. Describe the example and whether the organization or executive had to change their viewpoint or actions. Did this affect the executive’s compensation? If so, how? If not, explain why it should have?
2. Find an example of an organization or executive that shares something through a traditional or social media outlet that is controversial in some way or does not align with the mission and values of the organization. Describe the public reaction to the shared information and its effect on the organization. Did this affect the executive’s compensation? If so, how? If not, explain why it should have?

 If possible, provide links to your examples.

Words required: 500

Question 4

Many CEOs have chosen to take a stance on social, environmental, and political issues. Social media provides a direct communication channel to share their views with the public. These views may cause controversy, though as Professor Armstrong shared, most executives try to avoid divisive issues. This leads boards and shareholders to consider the effect that CEO activism has on the success of an organization.

Instructions:

Respond to the following in the discussion forum:

• Share an example of CEO activism and describe the effect, if any, on the organization.
• In your opinion, were the CEO’s comments appropriate, or did they do more harm than good?
• If a CEO’s stance affects the organization’s success, should the board of directors have a process to determine if a CEO can take public activist positions? Explain why. 
• Does the board have an obligation to discourage the CEO from taking a position on this topic? Explain your answer.

Words required: 500

Question 5

After the financial crisis of 2008, Wells Fargo experienced upheaval caused by internal and external factors. Three chief executives were at the center of this tumultuous time.

The organization’s troubles began under CEO John Stumpf; read the following article from the LA times for that part of the story: Former Wells Fargo CEO’s Financial Future Is Secure despite Millions in Penalties Download Former Wells Fargo CEO’s Financial Future Is Secure despite Millions in Penalties.

After John Stumpf, the board selected Timothy Sloan for the top job, even though he was part of the organizational leadership during the very public controversy. Read the following article from the New York Times about Timothy Sloan’s time as CEO: Wells Fargo C.E.O. Timothy Sloan Abruptly Steps Down Download Wells Fargo C.E.O. Timothy Sloan Abruptly Steps Down.

In 2019, the board searched outside of Wells Fargo to recruit the next CEO, Charlie Scharf. Read about his plans for the organization on the Wells Fargo website: Wells Fargo’s New CEO Charlie Scharf: “We Will Get It Done” Links to an external site..

Think about the actions of each of these executives and how they affected the Wells Fargo organization. How did their actions affect the public perception of the organization? Did the Wells Fargo board intervene appropriately?

Note: Please feel free to search for other articles related to Wells Fargo and its CEOs. Here are three additional articles you may find interesting before responding to the prompts below.

Wells Fargo CEO: Charles Scharf Biography Links to an external site.  Wells Fargo’s Scharf Leapfrogs JPMorgan's Dimon as Highest-Paid Banking CEOLinks to an external site.
Wells Fargo CEO's Compensation for 2020 Cut by 12%Links to an external site.

Instructions:

Consider these questions related to the Wells Fargo case study and respond in the discussion forum to at least one of the following prompts. You can reply to as many questions as you like. If you would like to discuss more than one CEO, please create a new post for each.

Respond to one of the following questions about John Stumpf:

• Wells Fargo CEO John G. Stumpf was named Banker of the Year by the trade publication American Banker in 2013 for successfully navigating the organization through the 2008 financial crisis. Explain whether you think this honor was well deserved based on his leadership and focus on internal checks/controls and a culture of proper risk management.
• Boards and CEOs drive aggressive growth plans that have to be executed by operational managers. In your opinion, did CEO John Stumpf have to “take the fall” for the mala fide actions and fraudulent activities by operational managers creating sham customer accounts when under pressure to meet aggressive sales targets? Explain your answer.
• Given the extent of the “fundamentally simple” fraud that went unnoticed, was CEO John Stumpf’s severance package of $130 million “reasonable” for three decades of service at Wells Fargo and its predecessor organizations? How was the severance package received by the public?

Respond to the following question about Timothy Sloan:

• Do you think the board made the right decision to appoint Timothy Sloan as the successor to John Stumpf given that Mr. Sloan was an insider and had held leadership roles throughout the scandal? Explain your answer.

Respond to one of the following questions about Charlie Scharf:

• Of all the changes initiated by new CEO Charlie Scharf, which do you think was perhaps the most impactful in transforming the organizational culture, practices, and public perception of Wells Fargo?
• Within a year of joining, Wells Fargo CEO Charlie Scharf was the highest-paid CEO in banking with $36.4 million in total compensation for 2019. Do you think that was deserved and justifiable in optics and public perception? 
• Wells Fargo CEO Charles Scharf’s total compensation for 2020 declined 11.7 percent from the prior-year level after the bank reported an 83-percent fall in net income due to pandemic-related slowdown and business disruption. His annual salary was decreased to $20.3 million from a target of $23 million in 2019. Was this fair to the CEO or more for public perception?

Word required: 500

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