The “at risk” component of remuneration for CEO implies that as the corporation becomes larger in size and demands of upholding a certain market value, the CEO is remunerated in addition to his fixed salary in order to sustain and fulfil shareholders expectations. Larger companies have larger expectations and a large market value and size, and in order to maintain this the CEO’s are rewarded extraordinarily to enhance organisational position and expectations. This extra payment in addition to the fixed payment is the “at risk” factor of remuneration. The larger the corporation size, the larger the “at risk” component.
The “at risk” component is large because there is a tag attached to performing more than what was required, and that extra performance is equated with a price tag given to the performer. Usually smaller organisations do not have such unrealistic expectations that it indulges into rewards for CEO, but the case is different in case of large companies. The extra performance is equated in monetary value terms, which depends on the investment returns of shareholders that the CEO is able to earn. Reputation of large companies is fragile and for many, it simply does not accept a decline in reputation. Thus, rewards are given to the CEO and managers to either adopt unethical means or artificially build up organisational value to its existing level or exceed it (Boatright, 2014). This is why the “at risk” factor of remuneration is high in larger companies.
Stakeholders are a team of entities or individuals who are directly or indirectly involved as the impacted, when the company operates its production or usual business. For a retailer, the stakeholders are the government, society, farmers, suppliers, environment, workers, employees, owners, creditors, banks, financial institutions, investors, shareholders, etc. These are the primary stakeholders of a retail company.
Ethical behaviour of a company is not just mandatory but it is primarily essential as the first rule of law, because their actions end up affecting all stakeholders. Their activities affect the environment in terms of pollution, farmers in terms of remuneration and fair treatment of food prices, government in terms of proper tax payments, suppliers in terms of business partners, and employees and workers in terms of their individual contribution to the end result of the total profits made by the company. If ethical behaviour is not a norm, any decisions shall affect any of these stakeholder, which is unethical because the stakeholders had nothing to do with the business but are unnecessarily impacted.