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CHAPTER 14: COMPENSATION FOR SPECIAL GROUPS (Furror Over Executives…
CHAPTER 14: COMPENSATION FOR SPECIAL GROUPS
Who Are Special Groups?
Specific groups receive special -In the form of add on packages not receives by other employees -Or as compensation smponents entirely unique in the organization
Characteristic: -Tend to be strategically important to the firm -Position tend to have built in conflict
Compensation Strategy For Special Groups
Supervisors
Pay strategies
-Key base salaries pf supervisors to an amount exceeding the top paid subordinate in the unit
-Pay supervisors for scheduled overtime
A trend in supervisory compensation is increased use of variable pay
Corporate Directors
Along with shifts in duties, pay has moved towards pay for performance
Stock options have gained prominence in the corporate directors, package
Boards now include more outside directors than inside directors
Executives
Stockholders often argue about the huge pay executives get when the firm is doing poorly
Part of the global economy meltdown can be traced directly to executive pay
Chief executives in many firms took huge financial risks
The shareholder, government, and taxpayers had to pay the price
Components of an Executive Compensation Package
-Base salary
-Short-term (annual) incentives or bonuses
-Long-term incentives and capital appreciation plans
-Executives benefits
-Perquisites or perks
Furror Over Executives Compensation(Critics and Press)
Critics arguements
Are they worth multi-million dollar package?
-Pay in other countries are much lower
Counter Arguments
-Executive compensation is a reflection of changes in the market
-Executives earn their increases by linking pay to performance
Compensation is much lower in not for profit firms
Ways to rein in executive compensation -Use of tally sheet -Increase government regulation -Stockholders can vote or propose limits to compensation
Furor Over Executive Compensation (Academics)
Economic approach -Value of CEO should correspond to some measure of organizational success
Agency theory -Compensation should ensure that executives have the best interests of stockholders during decision making
Social comparisons -Executive salaries bear a consistent relative relationship to subordinates pay
Scientists and Engineers in High-Technology Industries
Scientists and engineers are classified as professionals
Problems in designing pay
-Salary plateaus due to knowledge obsolescence of mature professionals
-Question of equity
Rewards Components (Professional Employees
-Performance based incentives: profit sharing, stock ownership
-Bonuses: Linked to company profits or personal performance, incentuves linked to completion of projects on or before deadlines, post hiring bonuses for achievements
-Perks based on unique needs
Contingent Workers
-Typical salary arrangements: Workers hired through temporary help agency and on call basis often earn less
-Independent contractors ear more
Identify ways to deal with equity issues -View workers as pool of candidates for more permanent hiring status -Champion idea of boundaryless careers
Sales Forces
-Growing trend towards linking sales compensation to customer satisfaction measures
-Standard compensation might not work