It’s Not Fair Summary: In any any orga organi niza zati tion on,, comp compen ensa sati tion on is the the key key fact factor or for for an empl employ oyee ee to get get satisf satisfact action ion.. So, employ employees ees more more concen concentra trate te on their their salari salaries, es, based based on this this moti motiva vati tion on and and inpu inputt leve levell will will vari varies es.. Simi Simila larl rly y deci decidi ding ng sala salari ries es to top top mana manage geme ment nt is toug tough h task task to comp compen ensa sati tion on comm commit itte tee. e. But But it crea create tess huge huge differences while comparing with low-level employee. Based on the euity theory the compensation is decided, but the critics from cooper will make committee to think about the success of firm not the status. !here the pay ratios which created from from "#$%s #$%s make ake into nto eigh eightt times imes more ore than than its its rati ratio o will ill make make thes thesee determinations as &It's (ot )air*.
Facts:
How fair is deciding the pay to Top-Management? +s per the case, the top management people were highly payable by the firm. By the cooper words, the compensation to top level is % times more than the low-level employee. But, the critics says that it is eight times more than its proportion of "#$%s, that which misleads their pay into ineuitable. Indeed Indeed of their their ob role, role, respon responsib sibili ility ty,, revenu revenuee and succes successs their their salary salary raises up. Because of that reason this case can be called as &Its (ot )air*.
Compensation is determined by !"IT# theory any of the researchers /compensation committee follow the euity theory to regulate the chief e0ecutives pay. It discuss the how much an individual will puts his inputs to get the output that which compares with other input and output levels. 1ere hardwork, commitment, loyalthy etc, are towards the ob which says as input and the salaries, recognition, reward etc, are called as outp output ut.. +s per per this this theo theory ry empl employ oyee ee get get dist distor orte ted d when when it poss posses es ineuitable levels between input and output levels.
Comparison with other firms compensation 2he given information says that board members are suggested to decide the compensation by comparing with other firms, which posses similar inputs and levels. Based on this, the pay is fi0ed to make the employee in a positive ineuity manner. In that, one should feel that he/she are over rewarded on a company to others. By comparing the top management of large firms with similar type of large firms and smaller firms with similar type of smaller firms.
For compensation$ success success is the %ey factor not status 2he 2he deba debate te rise risess on ine ineui uity ty prop propor orti tion onss of comp compen ensa sati tion on to supe superi rior or employee, not bothering with the firm's success. Some of the critics, says that based on the profits of the company the rewards can be distributed to the employee regarding to their inputs. 1ere, the importance is given to their efforts not to their positions. By this nature, the employee can be motivated to firm's growth and success.
!uestions& '( How does the e)ecuti*e e)ecuti*e compensation compensation issue issue re+ate re+ate to e,uity e,uity theory? theory? ho do you thin% shou+d be the referent others in these e,uity .udgments?
)airness and euity are the two key elements for to make the employee get motivated. !hereas, the euity theory deals with comparison of individuals inputs inputs and outcom outcomes es with with others others and influe influence ncess them them to elimi eliminat natee the ineuities between them. It mainly focuses on the distributive ustice, that how how an indi indivi vidu dual al will will rece receiv ivee rewa reward rd from from the the mana manage geme ment nt.. 2he 2he top top management of large firms with similar type of large firms and smaller firms with similar type of smaller firms are comes under referent others in these euity udgments. /( 0re there there any positi*e moti*a moti*ationa tiona++ conse,uences conse,uences of tying compensat compensation ion pay c+ose+y to firm performance?
3es, ther theree are are posi positi tive ve moti motiva vati tion onal al cons conse eue uenc nces es like like prod produc ucti tivi vity ty,, satisfaction, ob involvement, self determination, organization's organization's commitment and turnover variables etc, are related to the compensation pay closely to firm performance.
